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Energy Buying Strategies: Why Some Traders Are Bullish

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Winter and the Polar Vortex are finally over, so energy managers are hopeful that prices will fall. Let’s recap the winter before diving deeper into key considerations and the market outlook.

Market Overview

Here are a few winter highlights:

  • The NYMEX Prompt Month closed at $6.149/MMBtu on February 19, a five-year high.
  • The Polar Vortex caused record natural gas demand of more than 138 Bcf/day. The demand came from both heating load and electric generation, since traditional generation sources (coal and nuclear) were unable to meeting demand spikes.
  • Spot gas prices to New York City reached $50/MMBtu, with prolonged spikes over $20 from Chicago to New England.
  • Average spot power prices for some days surpassed $500 in PJM, over $300 in NYISO and NEPOOL, and over $200 in ERCOT.
  • Strong sustained gas demand caused huge withdrawals from storage, resulting in inventories reaching their lowest levels since 2003.
  • Domestic gas production remained robust (near 66 Bcf/day) thanks to shale, despite a few periods of well freeze-offs.

Prompt Month natural gas futures have fallen, as the winter months rolled off the board and volatility has significantly decreased. But overall, prices have remained strong and have even risen modestly over the last few weeks. Long-term prices have also risen, but remain significantly discounted compared to the near-term.

The details are in the numbers below:

(all prices are in MMBtu)
NYMEX Contract
4/10/14 Change since 12/31/13
Prompt Month $4.65 +0.55
12-Month Strip $4.69 +0.50
Cal '15 $4.36 +0.22
Cal '16 $4.22 +0.10
Cal '17 $4.32 +0.18




Winter and the Polar Vortex are finally over, thankfully. Read about energy buying strategies in the current market.

Posted: April 14, 2014

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