Unseasonably High Temperatures Contribute to Low Prices
Gas storage inventories increased again this week as the EIA recorded an 87 Bcf injection. The 87 Bcf injection is much higher than the 62 Bcf from last year and also much higher than the 5-year average. Gas prices did not react to this update with prices still hovering around the $2.31/MMBtu mark, essentially flat from last week. CAL 20 traded slightly lower this week and the further years have continued to remain constant. Continual higher than average temperatures on the eastern portion of the US is contributing to the extended bearish outlook. Inventories are expected to be around 3,800 Bcf by the end of the injection season.
Average Peak power prices in Zone J NYC decreased $.25 per mWh this past week, bringing the average to $20 per mWh. CAL 20 prices for NYC power remained the same week to week with further calender year pricing staying the same as well. Even though energy markets are at a low point, there is no guarantee these prices will remain throughout the winter. Consider reducing some of your energy cost exposure by making a hedge for the winter months now.
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.