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Reduce Your Energy Supply Cost Exposure Now

Earlier this week, prompt month gas prices traded upwards for 4 days straight. Prices are currently hovering around $2.70 per MMBtu. As much of the country is currently blanketed by unseasonally colder temperatures, the demand for natural gas for heating and for power generation has dramatically increased. As of writing this, it’s snowing out in Chicago right now! The injection of 87 Bcf reported on Thursday morning only alleviated prompt month pricing by a few cents.

Average peak power prices in Zone J NYC increased by over $5/mWh this past week, bringing the average to $25 per mWh. Even with the current gas pricing movement, CAL 20 power prices for NYC power remained the same compared to the prior week. Weather is one major driver when it comes to natural gas and power prices. An early winter for some parts of the country has already started to drive prices upwards. Consider reducing some of your energy supply 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.

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