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Prompt Month Natural Gas Prices Hit All-Time Low

Prompt month (January 2020) natural gas prices hit an all-time low during Monday’s trading session. At one point, almost trading $1 per MMBtu lower than the same time last year. Weather was the single most determining factor for this sharp decrease. Another potential weather shift for the later half of December is expected to usher in warmer than previously expected temperatures. Prices are currently trading around $2.30/MMBtu. 2020 Calendar strip decreases slightly as well, with prices also around $2.30/MMBtu. Calendar Strip 2021/2022/2023 are all priced around $2.45/MMBtu.

NY power prices are trading around $30/mWh, no significant changes from last week. Prices in ISONE decreased by over $5/mWh after significant snowfall hit the region in prior weeks. Those that live within the PJM market did not experience much of a chance in power prices with West Hub trading around $33/mWh. For customers looking to enter into a supply contract for either natural gas or electricity, now would be the time to consider it. With prices at or near 3-year lows, there would be value in locking in long term rates for the future years.

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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