JUNE 2019 ENERGY MARKET UPDATE
Supply and demand in the wholesale natural gas market impact electric and natural gas prices across the country. The U.S. stores natural gas to ensure we have an adequate supply for the winter; thus, the amount of available stored gas affects the market. Natural gas is also the primary fuel for electric generation, so its price also directly impacts electric rates. Currently, storage levels are low compared to recent history and typically would create higher prices, but increased natural gas production is helping to improve storage levels and has helped drop natural gas prices to multi-year lows.
The Bottom Line
High production of natural gas and mild spring temperatures have reduced the natural gas storage deficit and soften prices to multi-year lows. This trend has created an excellent opportunity to lock in low priced fixed supply for those who need to perform to budgets. Customers who are on index pricing are also seeing very low rates at this time. We expect these prices to remain as long as the summer heat stays away—which may not be for long. Be prepared: weather driven price changes and high summer heat could impact winter prices.
What to Know About 2019
While natural gas production is estimated to outpace consumption, it is not expected to bring back a large surplus. The risk of weather-driven price increases will continue with a mild summer or winter presenting the best chance of softening prices.
What To Do Now
If you have accounts on utility supply or a variable rate, this is a good time to consider moving to a fixed rate. Prices have declined, and there is a risk for summertime price increases. If you have contracts expiring between now and the end of the year, we recommend you price them early and evaluate your timing on completing your next supply contracts.
Temperature Probability Maps
Current temperature forecasts for 2019 are calling for above normal temperatures across most of the United States with the exception of below normal temperatures in the midwest this summer. The weather pattern is a moderate El Niño which is also expected to bring more precipitation to the eastern U.S. If these forecasts hold, we could see high air conditioning demand impact natural gas storage and prices, with potential price increases for energy into 2020. Conversely, if temperatures are mild, the high production levels of natural gas could allow for improvements in storage and softening of prices.