This week’s snapshot of the current energy market trends and recommendations for navigating the evolving landscape has arrived.
Supply Overview
- Electricity Generation:
We anticipate a significant increase in electricity generation over the next few years. In 2025, approximately 62 GWh of new generation is expected, offset by about 10 GWh of retirements, resulting in a net increase of around 4%. This growth is contributing to lower long-term future pricing compared to short-term rates. - Natural Gas:
Our natural gas reserves are currently 23.4% below last year’s levels and 11.5% below the five-year average. Production will average about 104.6 Bcf this year and nearly 107 Bcf in 2026. Even with stable demand, a surplus is unlikely for the next couple of years.
EIA: NATURAL GAS STORAGE REPORT
Weather Forecast : 6-10 & 8-14 Day Temperatures
Weekly Weather Outlook:
Impact on Natural Gas Prices
This week, the weather is expected to have a mixed effect on natural gas prices. Cooler temperatures on the West Coast could lead to slight price increases, as heating demand may rise in this region.
However, milder conditions across the East Coast will likely reduce heating demand, which could put downward pressure on prices. The overall impact will depend on how much colder weather affects the West Coast compared to the warmer conditions in the East.
NYMEX ROLLING PROMPT MONTH (chart)
The chart displays fluctuations in the price of the prompt month contract, which can be influenced by market conditions such as supply and demand, geopolitical events, and economic factors.
Demand Trends
- Electricity and Natural Gas: Electricity demand has been higher this year than in the past three years, and natural gas demand for power generation is above the five-year average.
- Gas Withdrawals: Last week’s gas withdrawal was 80 Bcf, lower than forecasted. With warmer temperatures approaching, gas injections may begin by April 1, marking the start of Injection Season.
NYMEX 12-MONTH STRIP
NYMEX 12-Month 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.
NATURAL GAS PRODUCTION REPORT (chart)
Recommendations
If you are not using a managed product, consider longer-term agreements for better rates, especially if you can pass through capacity to reduce premiums. For managed index products, focus on reducing or eliminating premiums by passing through energy and capacity costs.
Consult with an energy expert to explore hedging opportunities during market dips. Consider locking in a portion of next winter’s supply (25-50%) or securing on-peak hours during the summer when demand peaks.
Thank you for your continued interest in our energy market updates. We look forward to keeping you informed about future developments.
