NATURAL GAS: EIA Storage Report
The last two storage reports have been either right on target or slightly above projections, and that has moved the pricing up just a bit, though it is still well below $3.00. It also looks like the weather will be closer to normal over the next 6-14 days, which will mean cooler weather and higher demand.
NATURAL GAS PRODUCTION
High production, mild winter weather, and its effect on demand have been the main drivers of Natural Gas and electricity pricing. We continue to see warmer-than-normal temperatures throughout the country, and we are seeing lower overall demand for natural gas than we did in 2022 and are approaching the demand over the five-year average in 2021. This is despite yearly highs in Liquid Natural Gas exports, which make up part of demand.
NATURAL GAS DEMAND
Most of the market change over last week is due to early closures of the markets and suppliers around the holidays. If you see a reasonable price for your electricity and gas, you may want to jump on it, as a wait of two to three days could see wild swings in the market.
FORWARD POWER PRICING
Electricity in the BGE Hub and the AD Hub saw a sharp uptick last week, increasing by about $2.00 per MWh. Larger natural gas withdrawals and projections of a cooler run-up into early January have caused this.
WHAT IS FORWARD POWER PRICING?
Forward power pricing is a financial mechanism used in the energy industry, particularly in the electricity market. It involves the pricing and trading electricity for future delivery at a predetermined price. This mechanism allows electricity producers, consumers, and traders to hedge against price fluctuations in the electricity market and manage their risk exposure.
Weather Forecast: National Outlook
From December 27 to January 2, a slow-moving weather system across the east-central US will bring a mix of rain and snow. However, temperatures will remain relatively mild, ranging from the 30s to 50s. In contrast, the rest of the country can expect pleasant conditions with highs ranging from the 40s to 70s.
As we move into the following week, colder weather systems will enter the Midwest and East, leading to temperatures in the 20s to 40s. This may result in a more robust demand for heating. Despite this, much of the rest of the US will experience milder conditions, with highs ranging from the 40s to 70s.
Overall, the national energy demand is anticipated to be very light in the next five days, gradually increasing to a moderate level afterward.
NYMEX 12 MONTH PRICING STRIP
ALL ABOUT THE NYMEX TWELVE-MONTH STRIP
- The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
- A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
- The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
- The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
- The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
- The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.
