November Market Conditions: Early Cold Brings Roller Coaster Prices


What to Know, Now

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 directly impacts electric rates. Currently, storage levels are 15% above last year’s volumes and are continuing to put downward pressure on prices, while recent cold weather has caused short term price spikes.

Here are a few key points worth noting at this time:

The Bottom Line: As we head toward winter, all signs seem to be indicating the energy markets will remain soft until the cold weather arrives. Even with the arrival of cold weather, strong natural gas production is likely to keep the stored supply up and prices much lower than last year. 

NYMEX natural gas prices have been very volatile with a tug of war between bearish large storage level increases and short term bullish extreme cold weather. The chart below of the January 2020 NYMEX Natural Gas Futures price history displays the recent large price swings. Overall prices remain relatively low and still represent good buying opportunities.

Jan 2020 NYMEX Natural Gas Futures – Price History
Jan 2020 NYMEX Natural Gas Futures – Price History
For those of you who need to perform to budgets soon, pay close attention: this trend has created an excellent opportunity to lock in low priced fixed supply.

Customers who are on index pricing are also seeing very low rates at this time. We expect these prices to remain low until cold weather arrives. Winter index rates are expected to be high with pipeline constraints adding costs during high demand periods.

What to Know About 2019

While natural gas production is estimated to outpace consumption, it is not expected to bring back a large surplus. We expect that as the fall proceeds, prices will begin to rise due to a reduction in active wells (shut down to reduce available supply) and winter weather concerns. That said, even as prices rise, they will likely not rise as high as they did in 2018. 

What To Do Now

Prices are currently very low for natural gas and only slightly reduced for electricity. If you have accounts on utility supply or a variable rate, this is a good time to consider moving to a fixed rate.

Market Prices

Wholesale Market: Current 2019 NYMEX prices are 12% lower than 2018’s average prices, and 2020 prices are 7% below current 2019 rates. Declining prices in the NYMEX Futures market create lower fixed-price contract rates and are an indicator that the market expects future prices to remain low. Basis transportation costs remain high and will make heating accounts much more expensive than level usage non-heating accounts.

Wholesale NY Market: Prices have been in a favorable buying range supported by the softer natural gas market. Prices have increased slightly during a heatwave or extreme cold periods, but no impacts have been significant or long-lasting. The future years have higher prices because of increases in capacity costs and high electric rates anticipated with the shutdown of the Indian Point nuclear plant and the recently approved environmental law, Local Law 97 Carbon Emissions Cap.

Temperature Probability Maps

Current temperature forecasts for the remainder of 2019 are calling for above-normal temperatures across most of the United States. The weather pattern is a moderate El Niño which is expected to bring a mild fall across the country and below normal temperatures for the middle of the U.S. later in the winter. The east coast will have mostly mild weather with more normal temperatures expected later in winter. If the fall and winter forecasts hold, we could see continued low prices into the winter and through 2020.

            Nov./Dec./Jan. 2020                                             Feb./March/April 2020

  Nov./Dec./Jan. 2020