NATURAL GAS PRODUCTION
The Natural Gas market is undergoing a significant transformation, with drillers scaling back production. This has resulted in a consistent 4-5 weeks of production declines, culminating in last week’s output of less than 100 Bcf/d. This is a significant development, marking the lowest production levels since February 2023. The impact on storage numbers could have been more severe, but robust oil production has generated associated natural gas, a byproduct of oil drilling, thereby maintaining our storage numbers at an intense level.
NATURAL GAS STORAGE
The next two weeks are of utmost importance as the shoulder months are expected to come into full effect. This Thursday, we anticipate another withdrawal, followed by two weeks of injections. With warmer weather on the horizon, we project that demand will remain relatively low through May. This forecast is crucial for energy purchasing strategies, as it provides a clear view of the expected market conditions.
Gas pricing in 2025 is coming closer to 2024 levels. With this trend, it is better to look at a layered hedging strategy for your electricity, which is greatly affected by the price of gas. Set up the framework now that allows you to buy different blocks of energy ahead of time or when the market hits a dip. This will also help reduce the premiums you will pay on a fixed all-in rate, including pricing for future years that suppliers have to hedge against.
NYMEX CALENDAR STRIPS
Why buy now? All the risk is upside. Last month’s NYMEX settlement price of $1.61 is lower than every other month except July 2020, which is in the heart of the pandemic. There is little room for it to go lower. However, any major event, weatherwise, geopolitically, or just production cutbacks, could send the market much higher than it currently is. It’s crucial not to gamble dollars away on pennies but to consider a layered hedging strategy to mitigate these risks.
TOTAL NATURAL GAS DEMAND WITH EXPORTS
Export facilities will increase our LNG exports by about another 10 Bcf/d, and European demand could also rise dramatically. They have had two mild winters in a row and have the same fear we do of a colder winter, which cannot be predicted. Those increased exports will come from domestic production, leaving less gas in storage.
The overall demand for Natural Gas remains low. Exports have stabilized at around 13 Bcf, a significant drop from the record-setting 105 Bcf earlier this year. The Freeport, TX LNG facility has had to halt operations in a section of their location for repairs, further impacting the market. Natural gas demand is currently lower than the five-year, 2023, and 2022 levels. However, Power Burn has been higher than all but last year, indicating a potential shift in the market dynamics.
PJM BGE HUB FORWARD POWER PRICES
PJM AD HUB FORWARD POWER PRICES
WEATHER: 6-10 DAY AND 8-14 DAY OUTLOOK
The weather continues to be historically mild, with only occasional upticks that get erased quickly. There is no guarantee that next winter will continue to have record-breaking mild winters, and betting that we will continue to break the record for mild winters every year as we have the last two is an excellent way to get caught short when your contract expires.
Get ready for a mixed bag of weather this week across the US! Expect frequent showers and thunderstorms as several weather systems move through. But don’t worry, temperatures will generally be quite pleasant.
In the country’s northern parts, temperatures will range from the upper 40s to the 60s, making for mild conditions. Meanwhile, in the southern US, it’ll be even warmer, with temperatures ranging from the 60s to the 80s, and, in a few places, even hitting the low 90s.
Overall, the demand for heavy clothing or heating will be low to very low over the next seven days. So, get ready to enjoy some comfortable weather!
