Key Drivers 
- Hot May Temperatures
- Summer expected to average above normal temperatures
- Natural gas storage 300 bcf behind 5 year average
- U.S. end of summer storage level expected to be near 3.4 TCF versus being full around 3.9 TCF
Commentary
June natural gas NYMEX traded strongly above $9.00 before settling at $8.908/MMBTU. Natural gas prices continue to stay volatile with some strong bullish fundamentals leading the charge higher. May is starting the Spring/Summer season above normal temperatures in Texas, the Midwest and Northeast. This summer is predicted to be above normal, keeping natural gas consumption and prices lofty and storage injections soft. The U.S has storage capacity to inject nearly 4 TCF, but expectations are that we’ll head into next winter with storage only somewhere between 3.1 and 3.4 TCF. If the U. S. experiences a heatwave, prices could soar above $10/MMBTU and with it even higher electric prices. However, price volatility will continue with wild swings up and down making buying at the right time important. We help our clients find these lower price opportunities to buy some or all of their electric and natural gas supply either short or long-term.
There are two primary possibilities for natural gas prices to fall in 2022. First natural gas production needs to jump to 98-100 BCF/day by Q4. The current 93-94 bcf/day just isn’t high enough to meet the strong natural gas demand. The second possibility that no one wants is a U.S. recession. Of course weaker demand due to lower manufacturing would lower prices, but it seems more and more businesses are holding off buying natural gas and electric counting on lower prices as a result of a recession. Waiting on lower prices due to a recession is a risky gamble.
Instead of playing the waiting game hoping for prices to fall for whatever reason you may be hoping for, we at RD Energy believe that implementing some type of procurement strategy is crucial. It can be as simple as allowing us to set up some price targets and a Market Watch program to follow trends and provide you with periodic updates. There are also other options to give you some protection, including a weighted average buying approach or buying the non-energy components at favorable rates compared to PJM capacity costs averages for the past 5 years. Whether big or small, you have to do something to plan for the future. We always say that the first step is to get data and be informed before doing anything else. If your company, business or community isn’t getting the data and/or information you need or you do not have a procurement strategy, we can help you get going. Please contact us for a on-site visit, video call, or conference call.
Doing nothing but waiting in today’s extremely high priced and volatile natural gas and electric wholesale markets isn’t an option. There’s never been a better time to quote Nike, “Just do it”.