Key Driver & Startling Facts

1. 3.4 TCF final storage expectation well below 4 TCF full capacity
2. Very tight supply and demand NG balance in U.S, tilted heavily in demand’s favor
3. Global NG demand pushing European prices above $90/MMBTU vs. $9.00/MMBTU in U.S.
4. Electric prices in Europe now over $1000/MW vs. $115/MW in OH
5. 20 million U.S. households in U.S. or 1 in 6 behind on energy bills
6. Nearly 50% of European households face energy cost poverty
7. Electric prices in Europe is equivalent to $1000/barrel oil

Commentary
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Natural gas prices in the U.S are now over $9.00/MMBTU.  Will prices soften towards $8.20/MMBTU or blast through $10/MMBTU in the coming weeks?  Looking at things in the short-term we have to admit that with natural gas prices in Europe being over $90/MMBTU and electric prices being over $1000/MW and U.S. prices at $9.00/MMBTU for natural gas and $115/MW it’s hard to miss the Europe to U.S price correlation.  Russia is cutting off natural gas to Europe and Ukraine in an attempt to freeze their way to victory this winter.  Europe is fighting back with a Russian oil embargo of their own by December.  U.S. LNG is a very sought out commodity with Europe and Asia in a bidding war for it.  Since June when the U.S. lost it’s largest LNG exporting facility to a site explosion, U.S. LNG export capacity has been about 2 bcf/ day short of maximum shipping capability.  In November we should be back to maximum LNG deliveries as Europe tries to keep prices from exploding above $100/MMBTU.  If there is a price correlation between U.S and European natural gas prices, any many believe that there is, and Europe sees prices rise above $100/MMBTU, then it’s highly likely that U.S. prices will climb above $10/MMBTU.

An early start to winter here and abroad would spell very bad news for natural gas and electric prices here and abroad.  With U.S. natural gas storage likely coming in near 3.4 TCF out of 4 TCF full storage capacity at the end of the injection season around the end of October an early arrival of cold temperatures in the Midwest and northeast could drive prices well above $10/MMBTU.  The hope is to see a late start to winter and new natural gas supplies from ramped up U.S. drilling hitting the market in time to save the day this Fall and winter.

Wholesale electric and natural gas prices have risen to levels not seen since 2008.  The September NYMEX natural gas final settlement is $9.353/MMBTU.  This settlement price is over $3.00/MMBTU higher than the highest settlement price last winter when February settled at $6.265/MMBTU.  While we hate to throw out a lot of numbers the fact is we feel the need to show the severity of the wholesale price increases for this year over last year.  Everyone thought natural gas and electric prices last winter were bad when prices were close to averaging double from the winter before.  Now prices for both are much higher.  Ohio’s natural gas utility rates are high directly connected to wholesale prices.  Ohio’s electric utility rates have jumped around 40% in June 2022 and will likely jump substantially again next June.

It’s never been more critically important for businesses to know the basic facts about their electric and natural gas supply pricing.  What price are we paying?  Is it a fixed price or variable?  Do we have a third party supply agreement for our electric and natural gas or are we buying one or both commodities from the local utility?  When does our third party supplier contracts for electric and/or natural gas end?   If you don’t know the answers to these questions, you aren’t alone.  The fact is, a very high percentage of businesses don’t know the answers to these questions.  Many businesses we come across are paying extremely high variable rates for electric and natural gas.  At RD Energy we’re able to help you collect and organize the answers to these questions free of cost and with no obligation.  Armed with the new found information and data points we will discuss a procurement strategy going forward, what utility prices are versus wholesale price offers, and most importantly, how does your business lessen the impact of these higher electric and natural gas costs.  Whether your electric and natural gas supply contracts end in a few months or in the next year higher energy prices will eventually hit your budgets.  By knowing the most important points about your electric and natural gas supply pricing and contracts and by following wholesale market trends and setting price targets you will be much better prepared to tackle the high priced and highly volatile energy wholesale markets the result being that you buy electric and natural gas more timely and more competitively.

If you have any questions about your electric and natural gas prices being paid or need help with collecting and organizing the answers to the critically important questions, please contact us to set up a meeting online or on site.  Please keep watch for some upcoming online webinar invitations where we’ll give a market update, answer questions and help you prepare for the your next natural gas and electric contracts.