Key Drivers

1. Extreme warmth in the eastern half of the U.S.
2. Week of November 11-17 shows extreme warmth ending
3. Freeport, LA LNG facility – when will it come back online?
4. Europe natural gas storage nearly full and warm weather persists
5. The sizeable 2022 storage deficit versus 2021 will likely be eliminated

Commentary

If you like an amusement park with the largest rollercoasters, risky games that’s difficult to win and food you wish you hadn’t eaten, then this natural gas and electric market is right for you.  It has the thrills of NYMEX prices rising and falling over $.60/MMBTU per day.  Volatile prices seem to rise and fall so fast up an energy Buyer can hardly react fast enough to get a contract signed before prices change again.   September NYMEX settled at 9.35/MMBTU while December NYMEX is now trading near $6.00/MMBTU. Why the drastic drop?  The extreme warmth that has been well above normal in the eastern U.S. throughout much of October and is projected to continue during the first 10 days of November.  These extreme temperatures have greatly lowered natural gas heating demand for this time of year.   Plus, lower heating demand in October and early November has allowed for much higher weekly natural gas storage injections that has reduced the sizeable storage deficit versus both the past 5 year average and year ago levels.  While energy prices are still very high compared to prices prior to June 2021, we’re now at price levels not seen since April 2022.  If you have natural gas and electric supply contracts up for renewal this winter and you’ve been waiting for prices to drop, now would be an excellent time to review prices.  We can get some competitive quotes for you to review to find the best price.  The natural gas and electric markets are very likely near their bottom at least for now.

The big question remains.  What will happen when colder weather does show up in forecasts for the eastern U.S.?  What will happen to prices when the largest LNG facility in Freeport, LA comes back on by mid-November?  What happens when it gets cold in Europe?  What happens when the China manufacturing sector rebounds?   All of these things will eventually happen and effect prices.  Right now the extreme heat in the eastern U.S. looks to start dissipating around November 10^th.   The Freeport LNG facility has confirmed their intent to come back online at least partially by November 15^th.  It appears we could be in the last 10 days of the warmest temperatures we’ll see in quite a while in an otherwise overall tight global energy market where supply demand and supply is considered very balanced.  In a very tight and balanced market it means overall supply and demand has a low degree of separation.  In times like this we’ll see moments like we’re experiencing in October when demand drops substantially below supply and prices drop with demand.  Likewise, when we see extreme cold weather happening this winter and supply can’t keep up with demand we’ll likely see price extremes to the high side.  This price volatility seems to be the new normal.  If something effects either supply or demand, prices react accordingly.  The U.S. is once again in a La Nino weather pattern meaning that for the third year in a row the Midwest and northeast is likely to experience very cold periods of extreme cold as the jet stream buckles and allows the coldest air in from the artic.

We know the energy markets can be confusing and difficult to understand.  We also know our newsletter readers whether they are current clients or potential clients are interested is staying in tune to the wholesale electric and natural gas markets.  At RD Energy we believe that we strive harder than anyone else to give clients our time, our knowledge and our willingness to explore a variety of procurement strategies to lower their energy spend.  We focus all of our time on on market trend analysis, finding the best competitive pricing, providing value added programs as well as collecting and communicating both domestic and global energy data in such a way that our clients find great benefit.  Whether your are already a client of RD Energy or are feeling strongly that you should be, please email or call us with questions.