With electricity supply prices strongly correlated to natural gas price trends, it’s important to keep a close eye on the U.S. natural gas market. Over the past year we have enjoyed relatively low electricity prices, primarily due to a stable gas market that has been well supplied despite storage inventory levels below the 5-year average.
Henry Hub Near Lowest Prices in Two Decades
Last week the Energy Information Administration (EIA) revised its Short-Term Energy Outlook to reflect lower Henry Hub natural gas prices – about 19% lower than last summer. Despite some very recent heat waves, temperatures have been mostly mild throughout the U.S. which has meant a lower demand for natural gas-fired electricity generation. Without the demand, natural gas storage injections have been strong, surpassing the 5-year average rate.
Don’t Wait to Buy When the Market is High
When prices are low, securing an energy supply contract may not be a priority, and in fact, there may be hold-out for the market to decrease even more. But when market prices are high, many are eager to lock in a rate and execute a supply contract before prices increase further. Usource focuses on the marketplace fundamentals, which helps to mitigate the emotional aspect of purchasing energy, and prevents decision-making that can be counter-intuitive to the market.
Mother Nature and Gas Supply Growth May Hold the Keys to Price Movement
Should our recent hazy, hot and humid days stick around for the remainder of the summer, electricity consumption and natural gas generation will increase – likely causing an increase in energy prices. According to the EIA’s Short-Term Energy Outlook, it expects natural gas supply growth to slow to a moderate level towards the end of Q4 and into 2020, and therefore they feel it is likely that natural gas prices will increase.
While weather impacts prices in the short run, we recommend that our clients stay focused on the longer term market fundamentals and approach their energy contract procurement strategically. That typically means buying well in advance of your contract expiration. Contact a Usource energy advisor to discuss your options.