Key Drivers
- January – April 2021 NYMEX natural gas prices are averaging more than 40% higher than the same four months one year ago
- Short-term NYMEX prices rise and fall with the changing weather forecasts
- Long-term: NG storage levels, NG production levels, AC demand & LNG exports will drive NG and electric wholesale prices
Commentary
While it’s human nature to watch short-term energy prices our real focus needs to be on the future. Short-term cash prices have fallen as extremely warm temperatures continue through much of the country. It is interesting to note that even though March turned out to be very warm in the U.S and April seems to be following suit, wholesale prices are still holding at 40% higher than year ago levels. While there’s plenty of natural gas to meet demand now the big question is if enough will be available this summer to meet U.S consumption demand including AC load, inject enough natural gas into storage to make up the year over year storage deficit and at the same time meet the ever increasing LNG export demand. By August 2021 the answer to this critical question will start coming into focus. The answer will be reflected in natural gas and electric prices for better or for worse.
The U.S entered the 2020/2021 winter season with 3955 bcf in natural gas storage. We exited the winter with 1764 bcf in storage. Some storage level forecasts are predicting that the storage level entering next winter will be around 3100 bcf. If this turns out to be any where close to being true, natural gas and therefore electric prices will be jumping greatly mid to late summer as this reality becomes part of the energy traders mindset. We will continue watching this very closely each month. We continue to point out that if business consumers have electric and natural gas contracts expiring in the next two years, RD Energy can use our strong portfolio of suppliers to get new supply contracts fixed while price offers are attractive and also very likely lower than current contract prices that can be set to begin as your current contract ends.
In The News:
“President Biden’s new infrastructure proposal, the American Jobs Plan, unveiled March 31st, includes funding for roads, bridges, rail, ports, airports and other traditional infrastructure. The heart of the Plan, however, is the most ambitious program ever proposed to reduce use of fossil fuel and build a clean-energy economy. This includes: (i) $174 billion to promote electric vehicles (incl. construction of a nation-wide network of 500,000 charging stations and tax incentives for purchases of EVs): (ii) construction of 20,000+ MW of high-voltage transmission lines to expand sales of renewable energy; (iii) a ten-year extension of federal tax benefits for renewable energy and batteries; (iv) a national clean-energy standard requiring reductions in carbon emissions; (v) $16 billion to prevent emissions at abandoned oil and gas wells and coal mines; (vi) requirements for federal procurement of 24/7 clean energy and EVs; (vii) $35 billion for clean-energy R&D; (viii) billions of dollars in funding to retrofit buildings and homes; and (ix) phase-out of (not yet specified) tax breaks for fossil fuels. ( Andy Weissman. “Energy Flash Report: Significant Developments. 5 April 2021, page 2)
The other side of the isle will have a lot to say about all of this and will push for massive changes.