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Above Average Temperatures Keep NG Prices Steady

Since entering the new year, prompt month (Feb 20) gas prices recorded its lowest price on January 2 when prices settled at $2.12/MMBtu. Since then, none of the external factors that contribute to price fluctuations have resulted in much, if any, market movement. Prompt month prices are currently trading around $2.15/MMBtu even after this week’s storage report. The EIA reported a withdrawal of 44 Bcf which was less than the estimated 50 Bcf withdrawal. Current storage levels are about 20% above last year’s levels and just slightly above the 5-year average. The remainder of 2020 gas pricing is trading at $2.28/MMBtu. Calendar year 2021/2022/2023 gas strips are still all trading around $2.45/MMBtu.

Warmer than average temperatures throughout much the eastern portion of the U.S. have kept prices low and steady. Current Day-Ahead prices in ISO-NE, NYISO and PJM West Hub are trading between $25-$30 mWh. ERCOT (TX) prices right now are trading in the teens, at $18 mWh. Even though the winter months are not traditionally opportune to hedge future contracts, prices for both electricity and natural gas remain attractive for the upcoming months.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas-fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production would not be able to keep up with demand due to LNG and Mexican exports.

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