A number of our clients on price watch have decided to lock into renewal pricing now. Other proactive clients have engaged us to get contract renewal prices and decided to continue to monitor the markets for the time being. February was a relatively warm month, and as we have pointed out in past articles, natural gas production is still trending up. The market is less worried about the natural gas inventory deficit now that we are through the coldest months of the winter. This has pushed electric and gas prices down.
For those paying attention, this is a similar pattern to what we have seen the last few years. Coming out of the winter has proven to be a smart time to purchase based on seasonal pricing trends.
So to buy or not to buy now – that is a good question. For our clients that take a layering approach, the answer is strongly consider it. Pricing is attractive for 2020 through 2023. While the long-term fundamentals look favorable for continued low gas prices, a cold March followed by a hot start to the summer could send prices higher. It’s possible we are seeing the best opportunity for the year, and therefore, taking a portion of your price risk off the table makes a lot of sense. On the other hand, prices could head a little lower if the second half of March ends up warmer than normal and the summer weather forecasts show the potential for less hot temperatures.
For our clients that are making a decision about when to enter into their next fixed-price contract, we think it’s a good idea to engage us in pricing your renewal now. Pricing may look attractive enough to jump on, and if not, at the very least you’ve established a benchmark that we can actively monitor so you can be well positioned to pull the trigger at the right time. The critical piece to buying at the right time is to avoid being complacent. Whether your renewal is in 6 months for 30 months, it pays to engage Usource to actively monitor and price your renewal contracts.