- Weather – short-term, long-term, hotter than normal, colder than normal…eventually it all matters
- LNG exports – returning to higher daily numbers after maintenance programs
- U.S. natural gas production – returning to higher daily volumes after maintenance programs
- Natural gas prices in Europe/Asia on the rise
- U.S. Natural gas storage numbers above average
The wholesale natural gas and electric markets have been bouncing up and down for a few months. Are they going to get out of the recent stalemate and push one direction or the other or continue trading in the same price range for a few more months? Two of the key drivers to help answer that question seems to be working in tandem to not provide us easy answers. U.S. natural gas production seems to be quickly returning to normal after a few weeks of below average production volume due to pipeline maintenance programs. At the same time LNG daily export numbers were at their lowest levels also for the past few weeks due to maintenance programs. Beginning last Friday both U.S. production and LNG returned to normal pretty much simultaneously. U.S. daily production rose about 3 bcf/day while daily LNG flows increased between 2- 3 bcf/day. Will weather be the key driver helping point the way up or down for prices? So far this past Spring and early summer we’ve seen hotter than normal temperatures in the South West and central Midwest while below average or normal on both coasts. While the past week has seen more normal temperatures forecasts is the Midwest and northeast to return to normal to colder than normal temperatures the rest of July with Texas and the west coast remaining above normal. Again, a pretty neutral position for trying to figure out a direction for prices. Meanwhile, while last summer we went through summer with storage levels well below the past 5 five year average this year storage is well above the 5 year average. By the end of the storage injection season forecasts is for the final storage number to be very near the top end of total natural gas storage capability. The storage level can be viewed as a bearish price signal. When we look at European natural gas prices the fear earlier in the year that prices were so low in Europe that the economic benefit for LNG deliveries would be lacking and LNG would see an economic shut down by fall that would likely crush U.S. natural gas prices due to the huge drop in demand. That no longer looks to be possible as European prices have rallied substantially.
When looking at the key drivers it appears that short-term three things will give us direction of natural gas prices, and therefore, electric prices: 1. Will U.S. natural gas production get even stronger in the next 30 days than the recent 3 bcf addition supplies coming back online? 2. Will we experience any type of coast to coast heat wave in the U.S. in late July or August? 3. Will European prices continue to climb? Longer-term we have to wonder what El Nino will bring us next winter. Typically it seems that El Nino gives us warmer than normal temperatures in the Midwest and northeast. However, that’s not always the case. Wholesale energy traders like price volatility. What will be the unexpected happening or dramatic change in the key drivers to push or pull prices out of the high and low price range we’ve been experiencing the past few weeks?
As a business consumer what should you do? First, if your business is currently buying electric supply from the utility and not a third party supplier, then you need to get a third party supply agreement immediately, since utility electric prices in Ohio are at their highest levels in recent history. RD Energy can shop suppliers and help you get a third party supplier agreement at no cost to your business. Second, if you already have a third party supplier agreement, make sure you know when your electric or natural gas supplier contract ends. RD Energy clients know that we track that information for them and will reach out months in advance of the supplier contract expiration to track energy price trends and get new supplier offers for renewal. That isn’t the industry norm as suppliers usually keep customers in the dark so they can make higher margins on monthly variable rates after the fixed rates end. We believe RD Energy is the best defense against that happening for businesses large and small