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Breaking News: New England Energy Price Volatility

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There is an article today on the EIA website regarding natural gas price spikes in New England. This applies to power prices as well since they continue to correlate strongly with natural gas. The linked article is a good refresher on the key issues in the region.

In my opinion, next week’s weather is critical. Forward prices are very high based on fear that there will be an extremely tight supply when temperatures are below normal, which is the prediction for next week. We will see what happens. Depending on spot gas and power price movements, I wouldn’t be surprised to see severe fluctuations in forward gas and power prices for the remainder of the winter, as well as for next winter. If it’s cold, but there are no spikes, premiums in forward prices could shrink drastically. However, if there are severe spikes, then watch out.

Posted: June 12, 2013