Market Commentary

Market Commentary

Weekly Recap- Week Ending 7/13/2018

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.

Daily Natural Gas Settlements

As we enter the heart of the summer, the natural gas market seems to have taken a surprising twist of sorts.  In the face of a generally warmer than normal summer thus far and storage levels drastically lower than historical benchmarks, the prompt month natural gas contract spent much of last week in negative territory. By week’s end the prompt month had shed more than a dime and the 12 month strip more than 7 cents.

Last Week on the NYMEX

Just as the market was starting to feel like it might make a push higher to test $3 on the prompt month, it seemingly did the opposite and moved lower.  The prompt month finished the week at $2.752, its lowest settlement since May 9.

NOAA 6-10 Day Outlook

A couple of reasons have been generally accepted for the shift.  First, weather forecasts looking forward have cooled a bit bringing relief to the above normal temperatures many in the Midwest and Northeast have seen thus far this summer.  Second, it seems speculative traders are selling out of their long positions, which is helping drive prices lower.

Natural Gas in US Storage

Most in the industry have simply accepted that storage inventories entering the winter will not reach historical benchmarks like the 5 year average.  However, they are not concerned about this since production is stronger than ever, which means we should not need to withdraw quite as much from storage next winter to meet the peak demand.

Longer term, the industry is even less concerned about the current storage deficit as pipeline projects will continue to come on line and improve the national distribution network.  This has kept longer term energy prices lower than near term prices and long term hedging remains a very attractive option.

Weekly Commodity Changes in Power Markets (c/kwh)

Electric prices moved downwards with natural gas last week.  As usual, the New York City market was the most volatile.

The above comments regarding the NYMEX futures market are for illustration purposes only and the sole opinion of the author and not IGS Energy, its officers or its employees. Neither the author nor IGS Energy shall be liable for any information contained herein. This communication is no way intended to provide guidance or recommendations as to the value of or advisability of trading in any contract of sale of a commodity for future delivery, security futures product, or swap.

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