As we leave the winter electricity demand season we do need to reflect on the above normal, or record breaking, temperatures this past winter. NOAA reported that we had well over 5,500 daily warm records tied or broken just through mid-February and this will go down as the warmest winter on record in the US. In this backdrop and threat of global demand slowing due to the coronavirus it will be difficult for natural gas and power pricing to move higher in the coming year, outside a few price spikes or breakouts, that will be tough to sustain long term. Wind generation continues to grow and replaced hydro as top renewable generation source in the US and will continue to put pressure on power and natural gas pricing.
The March 2020 NYMEX Henry Hub traded down to $1.82/MMBtu, a $0.13 (-6.9%) decrease from the previous Wednesday. The price of the 12-month strip averaging April 2020 through March 2021 futures contracts declined $0.08 (-3.6%) to $2.17/MMBtu.
For the week ending February 21, the EIA reported net withdrawals from storage of 143 Bcf, which is lower than last year’s net withdrawals of 167 Bcf for this week and higher than the 5-year (2015–19) average net withdrawals of 122 Bcf.
Working natural gas in storage totaled 2,200 Bcf, which is 637 Bcf (40.8%) higher than last year’s working gas totals of 1,563 Bcf at the same time and 179 Bcf (8.9%) higher than the 5-year (2015-2019) average of 2,021 Bcf. Total working gas is still on the high end of five-year historical range.
Over the past week we did see power prices continue to move lower in most of the major trading hubs as prices settle back down into the bottom range of the past 12 months. The major trading hubs in the northeast were lower across the board, a few % points lower, for most terms with the surrounding load zones still lower up to 40% year over year to highlight how far we have fallen on the power curves.
The song remains the same as market participants looking to hedge PJM up to New England market exposure should see good value in hedging long term and any movements higher will be short lived and time not to panic and over hedge. As we exit the winter demand season it is a good time to get a jump on your forward customer demand positions and summer weather sensitivity to balance your fixed price books. Contact TrueLight to stay on top of value in current forward curve pricing and learn more about our portfolio management execution expertise. Contact TrueLight to stay on top of value in current forward curve pricing and learn more about our portfolio management execution expertise.
Headroom in the northeast WMECO territory is now available in the shorter periods for contracts with 3 and 6 month terms. Headroom of $0.00658/kWh and $0.00841/kWh is likely for these periods, respectively. Let TrueLight help you stay on top of current rates and subscribe to our PTC tracking and headroom reporting or use our price verification service to ensure you stay on top of all utility rate changes.
EIA released a report that wind is now the top renewable source of electricity generation in the U.S. surpassing hydroelectricity by 26 million MWh. Over the past decade wind generation has had a reliable increase, partially because of the extended Production Tax Credit. Typically these tax benefits drive wind capacity additions in the fourth quarter. While wind generation is affected by weather patterns, hydroelectric changes occur each year based on the varying precipitation with generation highest in the spring. Wind generation is highest in the spring and fall with capacity expansion being the main force driving wind generation. Contact us for advice and valuation modeling on all your clean energy generation development projects.
Comprehensive bipartisan energy bill may be voted on in the coming weeks. The Senate Committee on Energy and Natural Resources described it as the best opportunity to bring clean energy technologies and innovation to U.S. energy policies. Energy efficiency, renewables, energy storage, carbon capture, nuclear power and electric vehicles will be the focus of the bill. In addition, supply chain security provisions include setting up a domestic rare earth supply chain, cybersecurity and updating the grids. DOE’s Fossil Energy office would be advised to create a natural gas and coal program to improve costs and environmental performance. Contact TrueLight for strategic energy market support and analysis of the most up-to-date energy market news or use our price verification service to ensure the most recent market shifts are reflected in your forward price assumptions.
Below average temperatures are forecast for the western continental U.S. in the 8-14 day window starting March 7th. The highest probability for cool anomalies is all along the West Coast and in the northern Rockies. Conversely, the East Coast is expected to see above average temperatures, with the highest chances for warmth in the Mid-Continent.