Key Drivers
- Natural gas demand flips from heating to cooling with higher temperatures in Texas
- Long Speculators are squeezing the wholesale natural gas and electric markets up too much
- Natural gas drilling ramping up, but the first deliveries will be 2022 Q4 or 2023 Q1
- Will the natural gas storage deficit grow this summer?
- Very strong LNG exports continue
Commentary
In late April natural gas NYMEX settled for May at $7.267/MMBTU. The highest since 2008. Since then prices have only gone up even more. On Tuesday May 3rd NYMEX once again surpassed $8.00/MMBTU on news that AC demand in Texas was spiking due to a heat wave. Last week in Texas there was heating demand.
The speculators who help to push prices up take information like this and buys into the new data pushing NYMEX up dramatically. There is strong demand for natural gas both domestically and globally but are prices too high in our opinion? Absolutely. Price volatility for both natural gas and electric is extreme. Price dips are often over before consumers have time to think about reacting. This is a very tough time for businesses, large and small, trying to determine the right time to buy electric and natural gas in this high and volatile market. Decision makers are trying to figure out how to lessen the impact of these higher prices along with trying to figure out how they effect their product cost and market competitiveness while also trying to buy at the right time. When is the next dip? How long will it last? Will prices go higher? If I buy now and then prices drop, I’ll be upset. If I don’t buy and prices go up, I’ll be even more upset.
Natural gas producers are ramping up new production. But will it be enough when it does hit the markets? Will a recession slow down demand enough for energy commodity prices too fall? Will the current natural gas deficit grow this summer or will it be fine by the end of the injection season in October? Will we experience prolonged heat waves in the Midwest and northeast this summer? More questions abound than answers. Some energy insiders believe natural gas NYMEX could break $10/MMBTU this summer while others believe the high prices being seen now will weaken as we get more clarity on natural gas production, summer weather and storage. Fear of higher prices often drives the prices higher as business consumers react to higher prices concerns.
We at RD Energy very closely watch market trends and data trends to help our clients by at more opportune times rather buy with knee jerk reactions from fear. Energy is like a foreign language and the average energy procurement decision maker doesn’t speak the language. We become our client’s energy language interpreter by helping them more clearly understand the forces driving the market, find the products and services to help lower the impact of high energy prices and help create a buying strategy built around trends and data so they are buying at better times in the market. Consumers often need to be nimble and able to make quick decisions so your energy partner/interpreter had better be someone you know, like and trust. We work extremely hard to be that partner. If you are a RD Energy client and you have questions and concerns about these high energy prices even if your electric and natural gas supply contracts aren’t up for a while please call or email us since your knowledge and comfort is our primary focus. If you are reading this and you aren’t a RD Energy client yet, then email or call us to set up a time to talk about your current procurement status so we together can figure out the best plan forward. Doing nothing and sitting on the sidelines shouldn’t be an option in this high priced and volatile market. We look forward to helping bring clarity and peace of mind during this extreme time in the energy commodity markets.