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NG Prices Spike for First Time in Weeks

Prices spiked for the first time in weeks after yesterday’s natural gas storage report. The injection of 34 Bcf was much less than the 43 Bcf that was expected, immediately causing gas to jump about 5 cents in trading withing 10 minutes. Prompt month Dec 2019 gas prices trade in the mid $2.80s per MMBtu for the majority of the day before closing at $2.70 per MMBtu. A 12-month contract of natural gas crept up by half a percent compared to last week.

Power prices in the Northeast held steady for the most part and did not react to gas prices increasing. Zone J On-Peak Day Ahead prices are still trading around $25 per mWh, PJM’s Western Hub increased to $33.50 per mWh and Mass Hub is currently at $30 per mWh. We’ll experience a bit of a cold spell over the next few days and into next week. Prices will potentially increase due to a higher demand for natural gas and electricity for heating.

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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