Category: procurement

26 Nov

What to Know, Now: Energy Market Update: November 2018

Dan Levin Energy Markets, procurement

Prices are still high and it’s only November.

The Bottom Line

If you do not have a fixed rate natural gas contract, you could see an estimated 30% increase in your heating and electric bills this winter. Mid-November we saw a significant increase in natural gas prices. Why? You can read more about it here, but the main takeaways: weather drove up demand, the natural gas supply is depleting, and financial speculation of the natural gas market compounded the issue. You should consider short-term winter buys or variable products which may perform better than long-term fixed rates. But you don’t have to go it alone – we can help make those options clear and explain the benefits and risks.

Take Action

Some of you will be more vulnerable to this price hike than others. Contact us as soon as possible if you:

  • Do not have fixed rate natural gas contracts
  • Are on the utility rate
  • Are on a fixed rate contract set to expire before June 2019

We will work with you to determine the best course of action based on your current rates, risk tolerance, and budgets.

What to Know About 2018

November has been one of the coldest on record since 1950, and as a result buildings across the country are using more natural gas than predicted. This is further depleting a supply that is already significantly lower than this time last year. Unsure how to proceed? Our energy markets experts are here to help and provide clear recommendations.

15 Nov

Natural Gas Prices Skyrocket: What it Means for You

Dan Levin Energy Markets, procurement

Yesterday there was an 18% increase in natural gas prices!  If you do not have a fixed rate natural gas contract, you could see an estimated 30% increase in your heating and electric bills this winter.

What Caused the Price Spike?
Two factors regularly impact natural gas pricing: the weather (demand) and the amount of stored natural gas (supply).

Weather Drives Up Demand: November is predicted to be one of the coldest on record since 1950, and as a result buildings across the country are using more natural gas than predicted.

Supply is Depleting: Normally, a strain on storage would not cause this unprecedented price reaction. But, if you saw our market update last month, you know that the U.S.’s stored natural gas supply is 15% lower than this time last year and 16% lower than the 5-year average – the lowest since 2003.

Price volatility in winter months is not unusual, but financial speculation of the natural gas market is compounding the issue, resulting in a 49% increase in just two weeks (see chart below).

Take Action
Some of you will be more vulnerable to this price hike than others. Contact us as soon as possible if you:

  • Do not have fixed rate natural gas contracts
  • Are on the utility rate
  • Are on a fixed rate contract set to expire before June 2019

We will work with you to determine the best course of action based on your current rates, risk tolerance, and budgets.

november 2018 natural gas prices

29 Oct

What to Know, Now: Energy Market Update: October 2018

Dan Levin Energy Markets, procurement

Winter is coming. Higher prices are here and they may stay. 

The Bottom Line

Natural gas price volatility continues, and with it comes higher rates. In the last month, there has been a price jump that amounts to $.04/therm increase on a 12-month natural gas fixed rate. It’s not a great time to lock in. And you should try to avoid the high utility default rates. What does that mean? You should consider short-term winter buys or variable products which may perform better than long-term fixed rates. But you don’t have to go it alone – we can help make those options clear and explain the benefits and risks.

What to Know About 2018

What’s the cause of this volatile market? Low amounts of natural gas in supply. The US maintains storage of gas that ensures we have enough gas for winter heating. But compared to this time last year, there is now 16% less gas available. Although production has increased and will continue to pick up, we’re likely to continue to see a volatile natural gas market due to low gas storage. While we don’t recommend having accounts return to utility rates and receive default pricing, it may be beneficial to explore other pricing options before locking in for multiple years at high rates. Unsure how to proceed? Our energy markets experts are here to help and provide clear recommendations.

Temperature Probability Maps

This fall and winter are forecasted to have warmer than usual temperatures. The orange/red in the maps below indicate heat increases from normal. A mild fall that doesn’t require much heating in the North East would improve gas storage conditions and bring down prices. An average cold East Coast and Plains winter would reduce stored gas levels further and raise prices through all of 2019.

November 2018
November 2018
December 2018, January and February 2019
December 2018, January & February 2019
Summer 2019
Summer 2019
26 Sep

What to Know, Now: Energy Market Update: September 2018

Dan Levin Energy Markets, procurement

Today’s prices are inflated. Next week or next month may likely be a better time to buy.

The Bottom Line

Volatility has returned to the market. Natural gas prices have fluctuated by nearly 10% each month since May. Recently, we’ve seen a change that would amount to an increase of ~$.03/therm on your 12-month natural gas fixed rate. Imagine how that could impact your whole portfolio! Historically, the shoulder months of October and November are the best times to buy energy. We recommend waiting until pricing softens if you are able. For those of you who need to lock in your budget now, give us a call and we’ll help you decide the best next steps to avoid risk. 

What to know about 2018

What’s the cause of this volatile market? Low amounts of natural gas in supply. The US maintains storage of gas that ensures we have enough gas for winter heating. But compared to this time last year, there is 20% less gas available. Although production has increased and will continue to pick up, we’re likely to continue to see a volatile natural gas market due to low gas storage. While we don’t recommend having accounts return to utility rates and receive default pricing, it may be beneficial to wait until October to lock in your winter and 2019 rate. Unsure how to proceed? Our energy markets experts are here to help and provide clear recommendations.

Temperature Probability Maps

This fall and winter are forecasted to have warmer than usual temperatures. The orange/red in the maps below indicate heat increases from normal. A mild fall that doesn’t require much heating in the North East would improve gas storage conditions and bring down prices. An average cold East Coast and Plains winter would reduce stored gas levels further and raise prices through all of 2019.

October, November, December 2018
October, November, December 2018
Winter 2019
Winter 2019
Summer 2019
Summer 2019
20 Aug

What to Know, Now: Energy Market Update: August 2018

Dan Levin Energy Markets, procurement

Winter rates begin to rebound.

The Bottom Line

As we mentioned last month, something had to give. A combination of hot weather and low storage amounts can’t result in low pricing forever. Now, in the last two weeks, pricing has finally ticked up. The January gas rate has increased from $2.96 to $3.17/mmbtu since 7/18. Opportunities to lock in year-to-year savings are still available, they will become more difficult to capture as the month progresses.

What to know about 2018

After the increase, wholesale natural gas prices are now just 6% lower than 2017 on average. Last month, that number was 8%. Above normal temperatures continue to cause increased demand for electric generation for air conditioning, which reduces the gas we have in storage. At this time, we strongly recommend all customers who use Natural Gas for heating to evaluate their replacement supply contracts and consider switching off volatile utility rates if they are served by the utility.

Why Act Now

As we close out summer and head towards winter, the lower amount of natural gas in storage is a clear signal that market volatility will occur as 2018 progresses. Prices have already begun to rise, and capturing savings now compared to your last contract or to the utility rates is a safe maneuver.

Temperature Probability Maps

August and September will continue to be hot, highlighted by the West Coast and Northeast. This summer may end as the hottest on record. An El Niño effect is forecasted for this winter, which may lower rates by creating milder temperatures. The orange/red in the maps below indicate heat increases from normal. Continued hot summer weather will cause upward pressure on pricing, while a mild winter can mean low demand and low prices.

August, September, October 2018
August, September, October 2018
Fall 2018
Winter 2019
23 Jul

What to Know, Now: Energy Market Update July 2018

Dan Levin Energy Markets, procurement

A hot summer puts winter on edge.

The Bottom Line

With the record hot summer continuing, storage of natural gas is becoming an issue. For now, up-to-date prices for electricity and natural gas still compare favorably to 2016 and 2017 rates and present opportunities to reduce costs through both fixed and variable supply contracts.

What to know about 2018

Currently, wholesale natural gas prices are 8% lower than 2017. The summer 2018 favorable pricing may reverse as the year continues. Above normal temperatures cause high gas demand for electric generation to meet cooling needs. This, coupled with increased exports of liquified natural gas (LNG), will reduce the amount of gas available for winter and cause upward pressure on rates. If you have contracts expiring in 2018, we recommend exploring replacement agreements sooner than later.

Why Act Now

The changes in market conditions ahead increase the risk of higher prices and are clear signals to now to assess your supply options for electric and natural gas. Look to protect costs this winter by acting while rates are low.

Temperature Probability Maps

This summer may be the hottest on record. An El Niño effect is forecasted for this fall and winter, which may lower rates by creating milder temperatures. The orange/red in the maps below indicate heat increases from normal. Continued hot weather will cause upward pressure on pricing, while a mild fall and winter can mean low energy demand and low prices.

Summer 2018

 

 

Fall 2018

 

 

 

 

 

Winter 2019

 

27 Jun

Why We Worry With Weather Weirdness

Dan Levin Energy Markets, procurement

Of the many things that move energy prices, weather is the most obvious of all. The equation is simple. Extreme cold in winter requires more fuel for heating, demand goes up, therefore price goes up. But not all temperature changes are as obvious as winter cold = high prices or summer heat = high prices.

Shoulder months (months between winter and summer) are often considered slow periods for energy price volatility. But even these calm periods can move the market. Unfortunately, this past April and May are good examples of how unexpected temperatures can alter market conditions.

You won’t be surprised to hear that outdoor temperatures are measured at thousands of locations around the country. But did you know that those figures are used to create a special metric measured by how much temperatures vary from a 65-degree benchmark? In winter these are known as “heating degree days – HDD” (degrees under 65) and in summer as “cooling degree days – CDD” (degrees over 65). The greater the number, the more heating or cooling is required.

In the tables below you can see the heating degree days for April and May and the cooling degree days for May. April was 36% colder than the five year average for the month, while May was 47% warmer. Additionally, May was so warm that it used 57% more cooling degree days than the five-month average.

HDD CDD April May 2018

So, why do we care?

We care because the temperature swings in these months have a direct impact on natural gas usage, stored volumes, and, ultimately, natural gas and electric prices. The combined effect of April and May 2018 produced an elevation in prices into a new and higher trading range (about a 3% increase). All supply bought for next winter is impacted by these months and will remain in place until the next market shift.

So What’s Ahead? El Niño, maybe.

Over the past few months, the surface water temperature in the Pacific has been rising and is heading toward an El Niño effect later this fall. So what does this mean for us?  Simply put, it will create warmer weather in the north, creating a change in the jet stream that will reduce the impact (but not the number of) hurricanes. The overall effect of El Niño is a moderately bearish change (unless usage and prices drop). While the arrival of El Niño and its strength are still uncertain, we can definitely take away an important lesson from this spring: when it comes to weather, expect the unexpected.

26 Jun

What to Know, Now: Energy Market Update June 2018

Dan Levin Energy Markets, procurement

Summer begins. Still a buying opportunity.

The Bottom Line

Current prices for electricity and natural gas compare favorably to 2017 rates and present opportunities to reduce costs through supply contracts. Today’s lower prices are supported by record high levels of natural gas production.

What to know about 2018

While today’s prices are still low, there is concern this hot summer will cause high demand for electric generation to meet cooling needs. Continued increasing exports of liquified natural gas (LNG) will reduce available gas for winter storage. If both a hot summer and increased exports occur, there may be a reversal and prices may rise this summer and winter. If you have contracts expiring in 2018 or early 2019, you will want to price them early and evaluate your timing on completing your supply contracts. If you are receiving procurement services from Bright Power, we are already completing or planning this evaluation for you.

Why Act Now

In the past month, hot weather and hot forecasts have buoyed prices up, while increased production of gas has kept prices in range. These factors may fall out of balance, increasing the risk of higher prices this summer and winter. As many property owners and managers are risk averse, it is clearly a time to protect prices this summer and to prepare to capture the winter prices if the market remains favorable.

17 May

What to Know, Now: Energy Market Update May 2018

Dan Levin Energy Markets, procurement

It’s not easy to buy the low, but make sure you don’t buy the high.

The Bottom Line

Right now, the market and pricing are telling us that a two or three year fixed rate agreement is the safe and smart choice. Going long, as in buying longer-term fixed rate contracts, is the safe bet right now. With third-party supplier pricing for electric and gas still comparing favorably to 2017 and winter 2018 rates, many customers are pulling the trigger and capturing a near market low, before the tide changes.

What to know about 2018

Today’s prices are low, based on high levels and efficient natural gas production in the US. However, there is a serious concern that the upcoming hot summer may cause higher demand for electricity to power additional air conditioning. This would reduce the amount of gas we have in storage for later use and cause market volatility. If this happens, gas prices may rise this summer and impact winter prices as well. If you have contracts expiring in 2018, we recommend evaluating your future contract now!

Why Act Now

Many property owners and managers are risk adverse. It’s better to capture a 5% guaranteed year to year cost savings than take a risk that could result in a 30% cost increase! We help our clients choose the right plan for their budgets and their risk levels. Right now, the market and pricing are telling us that a two or three year fixed rate agreement is the safe and smart choice.

24 Apr

What to Know, Now: Energy Market Update April 2018

Dan Levin Energy Markets, procurement

The weather hasn’t warmed up, and neither have gas prices. This is a good time to buy electricity and natural gas.

Shoulder months such as April, May, October, and November are often the best times to buy energy. The volatile winter is behind us and pricing has been in a favorable range. But summer weather ahead will bring price volatility. Pricing has been down despite lower storage amounts of natural gas, which may impact the market as we get closer to Summer.

The Bottom Line

Current third-party supplier fixed rates still compare favorably to 2017 utility rates and present opportunities to reduce costs through both fixed and variable supply contracts. Many customers who were hurt by high variable pricing this January and February would benefit from a cost reduction and budget certainty.

What to know about 2018

Today’s lower prices may be temporary. In April, valid weather forecasts for the summer are released and they predict a hot summer. This would increase demand for burning natural gas to create electricity for meeting higher air conditioning needs. The chain effect is higher pricing for the near future, summers, and winters. If you have contracts expiring in 2018, you may want to price them early and evaluate your timing on completing your supply contracts. If you are receiving energy procurement services from Bright Power, we are already planning this evaluation for you.

Why Act Now

The mix of upward price pressure from a larger storage deficit and downward pressure from record levels of production are creating an uncertain future. Look to protect prices this summer and to prepare to capture the winter prices when the market is favorable.