Highest Natural Gas Price Increase in 2 Months
The natural gas market experienced a bit of volatility throughout this week. Early in the week, due to above-average temperatures throughout the US, prompt month gas prices traded around $2.33/MMBtu. One day later on Wednesday, the market gained over 11 cents to settle at $2.44/MMBtu because of a potential weather shift for the second week of December. This was the highest single-day increase in over 2 months. Prior to the storage report release on Thursday morning, prices retreated a bit but immediately jumped another 4 cents after the release. Gas inventories decreased by 19 Bcf for the third withdrawal of the winter season.
Electricity prices in the northeast increased significantly, especially in New England, because of the widespread snowfall within the region. Prices hovered around $45/mWh for the first part of this week after trading around the low $30 range right before the holiday break. NY and PJM prices continue to trade within $25-$30 mWh with no drastic increases expected.
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.