ARTICLE
The heat is on! It feels like we went from winter to summer in a day here in Ohio, but after a long, cold winter, who’s complaining? Despite the prolonged winter weather and sudden onset of summer-like heat, the gas and electric markets have held fairly steady. Several key market drivers have helped to hold this less volatile pattern, but with the true summer cooling months almost here, small changes among these drivers could have a relatively large impact on natural gas and electric pricing. Natural Gas: Front month natural gas prices have settled between $2.55-$2.82 dating back to 2/5/2018, a span of 64 total trading days as of Monday, May 7th. Such a stretch of involatile market movement is abnormal, especially considering it was the middle of winter during the beginning of the aforementioned time range. April 2018 final NYMEX settlement = $2.69/MMBtu May 2018 final NYMEX settlement = $2.82/MMBtu Record natural gas production levels are attempting to keep supply prices subdued in the midst of a gas storage deficit that enlarged during the historically cold month of April. Gas-fired demand for electricity (to run air conditioning units, among other things) will play a pivotal role in the direction this market heads in over the coming months. Electric: Many of the happenings in the natural gas industry have a large effect on the electric market, such as underground storage levels, natural gas-fired power generation, the exportation of liquefied natural gas (LNG), and anything that shifts the supply/demand balance. As the trend continues from past years, power generation has increasingly shifted from coal-fired to natural gas-fired generation as the more cost-effective option. Due to the increase in demand for natural gas during peak summer electric consumption, if we see volatility in the gas market, it is likely to translate to a degree to the electric market. This volatility could also be heightened if we experience a hot and prolonged summer, as the weather plays a key role as well. Despite these risks for upward price movement, the relative consistency of the markets over the last several months has continued to allow consumers to take advantage of lower electric rates. Many customers have realized bottom line savings as well as the ability to lock-in pricing to provide more budget certainty. Summer is one of the higher pricing points during the year, so don’t leave yourself exposed to potentially volatile pricing. If you have not reviewed your electric purchasing strategy recently, please reach out to your CES representative! CES Energy Consultant Emilie Snider 419 491-1017