RD Energy Stay Current Newsletter: January 2024

RD Energy Stay Current Newsletter: January 2024

Key Drivers

  1. Cold and snow arrives in January forecasts
  2. Natural gas storage levels are higher than the past 5 year average
  3. Near record daily natural gas production levels
  4. Speculator “short-sellers” are pushing natural gas NYMEX down

 

Commentary

Your RD Energy team would like to welcome you to 2024.  Once again, we would like to thank our RD Energy clients for their trust and confidence in our efforts to help each company buy their natural gas and electric timely, competitively and effectively.  As we begin the year 2024 we’re adding a new tag line to our client and prospect communications, “Uniquely Defining Energy Procurement”.  We strongly believe we are unique in the energy industry, unlike any of our peers.  In a business environment where telemarketers are calling with all kinds of made up and deceiving messages to try and make people get scared, concerned or worried that they are missing something important and need to quickly react in some way, we at RD Energy work each day studying and researching energy industry data and trends so every customer feels calm, comfortable and at peace knowing we are closely monitoring the electric and natural gas markets along with their contract pricing and end dates and will contact them when something actually needs reviewed and completed.  We have many clients with energy contracts expiring in 2024, 2025 and 2026.  While we don’t have a crystal ball that tells us exactly what will happen in the energy markets, we do very closely monitor energy data every day as well as wholesale price trends and associated energy information to help each client buy at the right time.  Many of you will be contacted before long by our RD Energy team to get updated bills and utility forms in place so we can get competitive pricing when the time is right for your upcoming energy supply contract renewals.  Now let’s review what we’re seeing in the energy markets as we leave 2023 and begin 2024.

Wholesale energy prices could not have experienced many more bearish conditions than they did in December 2023.  December 2023 had average temperatures nationwide well above normal.  Along with the extremely warm temperatures in December U.S. natural gas daily production hit historical levels.  U.S. natural gas storage levels are currently higher than the past 5 year average at this date.  Also helping push natural gas prices down are the very active “speculators” who have been selling natural gas NYMEX contracts in very high quantities.  All of this bearish data and speculator selling pushed NYMEX down to the third lowest price point of 2023 around December 13th.  The question most frequently asked is, “will prices go up from here or down from here”?

Let’s look at it in terms of probability.  We just exited one of the warmest Decembers on record and at the same time had the highest amount of natural gas in storage in more than 5 years along with the highest daily natural gas production ever.  Due to these factors the probability looks to be in favor of higher prices from where they are now.  In addition, we’re now entering January with 3-week forecasts trending colder the deeper we go into January.  January is only one month so we’ll have to wait and see what February, March and April temperatures are like.  At this time many energy experts do expect the entire 2024 year to be oversupplied with natural gas.  The final answer on how wholesale natural gas, and therefore, wholesale electric prices will play out will depend on how the remaining winter months finish up in terms of cold or warm temperatures, how hot the summer months are, meaning how much natural gas is gobbled up in power generation for AC load, plus how much LNG gets exported the rest of 2024.   Last but not least,  the big question is whether LNG export capacity increases 5-10 bcf/day in late in 2024 or will it wait until winter or spring 2025?

Again, we’ll be reaching out to our clients to get new bills and utility forms so we can collect competitive prices, watch wholesale price trends and stay in close communication.  We’ll also talk strategy and discuss procurement options and timing.  In the case of electric procurement we can even buy part of the electric at some point in time and buy more later rather than buy 100% of everything at one point in time.  Then when we both agree the time is right to renew your businesses’ electric and/or natural gas supply agreements, we’ll be ready to act timely basing decisions on energy data and trends instead of just the calendar.  If you have questions or would like to set up a meeting, please feel free to contact us.

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