RD Energy Stay Current Newsletter: December 2023

RD Energy Stay Current Newsletter: December 2023

Right now, both the natural gas and electric energy commodities are fundamentally and technically bearish and wholesale prices are falling sharply.  We are near a January natural gas NYMEX trading support level that if broken could push prices down quite a bit lower.  What is causing this drop and can prices reverse back up this winter?

The past three winters in the U.S. experienced La Nino weather patterns, but this winter we’re experiencing an El Nino weather pattern that is exactly the opposite of a La Nino.  Actually the U.S. is currently experiencing a strong El Nino as we enter December helping to pull the southern jet north and along with it warmer than normal temperatures.  In the Midwest and northeast there will be quite a bit of a flip flop of temperatures as numerous short lived cold fronts out of Cananda pushes the southern jet stream back south temporarily.  As we’ve already seen and will continue to see throughout December the southwest with see the southern jet stream bring numerous wet weather systems that will later head up the east coast.  It’s predicted that the strong El Nino will weaken to at least to a moderate El Nino starting in January and continue to weaken in February and March bringing a much more increased risk of cold from Canada into the Midwest and northeast.  While the first half of winter starting with December will likely average 3-5 degrees above normal, as the strong El Nino weakens the opportunity arises to see the last half of winter in February and March to be more normal with the likelihood of some real cold periods and heavy accumulating snow especially in the northeast as the cold fronts from the Polar jet stream hits the storms from the southern jet streams increasing the likelihood of nor’easters.  Some weather models are showing a weak Polar jet Stream that could quite easily lose its normal circular shape aided by strong high pressure systems causing a stratospheric event that in turn means that the Eastern U.S. could see a Polar Vortex extremely cold temperature event.   A stratospheric event is 20 miles above the atmosphere so it often takes 3-5 weeks to hit the ground with the extreme cold once it begins. Some weather models predicts a stratospheric event beginning in mid-December meaning that we could see the cold effects by mid-January so we are keeping close track on that.

As we like to remind everyone wholesale natural gas prices is the key driver of electric wholesale prices.  They run in very close parallel most of the time.  The current natural gas trading environment is very bearish today due to a number of things:

  1. U.S. natural gas storage is extremely full.
  2. Above normal temperatures are forecast for the next 3 weeks in the U.S.
  3. November 2023 had the strongest daily natural gas production in history at 105.1 bcf/day
  4. Extremely full natural gas storage in Europe

Technical traders are pushing natural gas prices down even further by “shorting” the market by the largest numbers since February 2023 when NYMEX briefly hit $2.00 due to the extreme warmth last January and February. January 2024 NYMEX is currently trading near a strong support point.  If it breaks the support price point, we could see NYMEX prices dropping another $.20 – $.40/MMBTU as the number of short-sellers reaching extreme levels.  The next three weeks in the U.S. is forecasted to average above normal for much of the country giving an excellent opportunity for the prices break the support point and fall further.  This provides an excellent buying opportunity for businesses who have 2024 and 2025 energy contract renewals.  However, customers should also be aware that market opportunities like this can either be short lived or turn the opposite direction quickly.  When technical traders have “shorted” the market at these high levels and some price catalysts appear either in terms of higher expected demand or lower production the price turnaround could be fast and extreme the opposite direction as the short sellers are squeezed to get out of their trading positions pushing prices up.
RD Energy clients know that we closely watch wholesale natural gas and electric data/market trends watching for buying opportunities.  For any reader of our newsletter who isn’t already a RD Energy client we recommend allowing us to help you gain control of your energy procurement:

  1. We review what your business is currently paying and when your energy contracts expire
  2. We benchmark competitive prices showing any savings available beginning at the contract renewal date
  3. We provide some advice and a recommendation of the next steps to take

While these steps sound shockingly simple its surprising to hear when we talk with new client prospects that most companies don’t know the very basics of what their business is paying, who they are paying for energy and when their energy contracts expire.  It’s easy to put an energy procurement strategy together once you know the basics and are working with the right energy partner.

Whether you’re are a current RD Energy client or wish to be, please contact us with any questions you have about energy procurement.  We know prices are bearish now, but that will eventually change.  We also know prices will remain volatile in the years ahead as both domestic and global supply and demand issues change.

Share this post

Ready To Save !?

Schedule A Quick Call!

Just Let Us Know A Convenient Time For You And Darrell will call you to discuss how we can save you money today!

We Can't Wait To Save You Money