Market Commentary

Market Commentary

Weekly Recap—Week Ending 07/22/2016

Stay up to date on the latest information and changes that may impact natural gas and electricity pricing with the Market Commentary. Download a PDF version of this week’s Market Commentary here.

NOAA 6-10 Day Outlook

Two and a half years ago, the majority of the US dealt with the “Polar Vortex” and its impact on temperatures and energy markets. This summer, a new weather phenomena known as the “Heat Dome” has dominated July 2016 headlines.

What exactly is a Heat Dome? From NOAA: “A heat dome occurs when high pressure in the upper atmosphere acts as a lid, preventing hot air from escaping. The air is forced to sink back to the surface, warming even further on the way. This phenomenon will result in dangerously hot temperatures that will envelop the nation throughout the week.”

WEEKLY COMMODITY CHANGES IN POWER MARKETS (c/kwh)

Interestingly, a key takeaway from the Polar Vortex is actually a significant increase in generating capacity for electricity in the form of the Capacity Performance requirements that were recently implemented. While Capacity Performance has increased costs in the market, it is noticeably helping to keep a lid on real time prices for power this summer. An extreme example comes from Texas where years ago summer prices peaked as high as $3,000 per megawatt hour. On July 25, 2016, that same market is peaking at under $40 per megawatt hour.

DAILY NATURAL GAS SETTLEMENTS

The natural gas market continues to hold firm at its current levels as it seems that most traders and analysts have priced the summer heat into the market already. That it remains hot and injections are not living up to historical benchmarks is not surprising to the market and we are therefore seeing minimal price response to these events. The 12 month strip for natural gas and power actually dropped slightly throughout last week.

LAST WEEK ON THE NYMEX

NATURAL GAS IN US STORAGE

The comments made above regarding the NYMEX futures market are the sole opinion of the author, not necessarily the opinions of Interstate Gas Supply, its officers or its employees. Information provided in this “Market Update” is for illustration purposes only, and neither the author nor Interstate Gas Supply shall be liable for any information contained herein.

IGS Energy provides weekly analysis and market updates on industrial and commercial natural gas news. We cover natural gas prices, futures, and national storage information, giving you the most accurate market data.

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