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Biden, Cuomo Advance Climate Agendas with New Plans, RECs

The ship that was wedged in the Suez Canal finally became unstuck but the build-up of ships waiting to get through could make it another week before shipping schedules get back on track. The Suez Canal is one of the main routes for LNG cargoes going from the Middle East to Europe, as well as to Asia. Foreign producers were at a disadvantage when they weren’t able to utilize the Suez Canal in Egypt and this provided an opportunity for U.S. producers to fill orders.

Clean Energy Standards (CES) increased in New York with Governor Andrew Cuomo’s goal of zero emissions by 2040, and new tier 4 RECS have been announced. The regulatory charges portion on your energy bills will likely rise within the coming months. President Biden’s plan would spend $16B to clean up old mines and oil wells in order to advance his climate change agenda. This includes new offshore wind power programs. The bit of cold weather this week will be short-lived because warmer-than-normal temperatures will make their way back the first week of April. The May 2021 natural gas contract is trading down $0.02 at $2.59 while the May 2021 crude oil contract is up $0.84 at $60.00. The EIA reported an increase of 14 Bcf into storage this week which was not far from the 16 Bcf that was expected. Current inventory is now at 1,764 Bcf which is less than this time last year and below the five-year average.

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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