EIA: WEEKLY NATURAL GAS STORAGE
The weekly gas storage report from the EIA showed the first withdrawal of the season with a withdrawal of -7 Bcf. This low withdrawal is due to colder weather, but the weather across much of the US looks like it will be warmer than normal in the 6-10 and 8-14 day forecasts
There are three main factors for the dip in the natural gas price:
- Larger than average production (105.2 Bcf in the last report)
- Warmer than average weather and winter forecast.
- Strong injection reports over the last month.
NATURAL GAS: NYMEX 12-MONTH ROLLING STRIP
With the fall in pricing last week, pricing is below $3.00 on the Henry Hub in the prompt month and all months up until July 2024. Gas fell next winter from $4.72 in January 2025 to $4.20. All the factors listed before are behind this, along with solid production and near-record levels of 105 Bcf/d.
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 future for a year.
WEATHER: 6-10 DAY AND 8-14 DAY OUTLOOK
Brace yourself for a chilly change in the weather this week! Over the next three days, a cold front will move through the northern and eastern parts of the US, bringing rain and snow with temperatures dropping to the 0s to 30s range. This will lead to a surge in national demand for heating. The impact will be felt as far south as Texas and other parts of the South, where temperatures will dip into the 20s and 30s.
As we move towards the end of the week and into the weekend, temperatures will rise to near or above average. In the northern US, expect highs in the 30s to 50s, while the southern US will enjoy milder weather with highs ranging from the 60s to 80s. This shift in temperature will likely result in lighter demand overall. So, get ready for a cold start, but things will be warming up as we head into the weekend!
ELECTRICITY: FORWARD POWER PRICES
Electricity pricing has taken a sharp dive in the AEP AD and BGE Hubs. Since the beginning of the month, they have each fallen lower by $3.00 per MWh.
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 of 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.
CHART – PJM BGE FORWARD POWER PRICES:
CHART – PJM ADHUB FORWARD POWER PRICES:
