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Energy Market Update: August 6, 2019

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It’s August, and fall is right around the corner, which means it’ll be winter before we know it. Sad as that may be, there’s no question that now is the perfect time to start planning for winter. Today, Direct Energy Business Strategist Tim Bigler wants to help you get a head start with a key insight for natural gas buyers this winter:

 

 

NYMEX Winter strips are contracts where the duration is the 5-month “strip” from November to March. Winter strip prices for this upcoming winter (November 2019 to March 2020) have fluctuated; currently, they’re currently at an all-time-low of 2.387 $/MMBtu (down from over $3 as recently as March 2019). That’s not to say they won’t go lower, but now could be an opportunity for buyers who want a favorable price and don’t think these winter strip prices will go much lower.

What’s there to say about future winters? They appear to be following suit. 2020-221, 2021-2022, and 2022-2023 winter strip prices have been in decline since early June, with later contracts maintaining higher prices consistent with a contango pattern. A contango pattern means that futures are more expensive than spot contracts, which is usually an indicator that a commodity is expected to become more expensive over time. If this pattern holds, it may benefit buyers to start budgeting for winter sooner rather than later.

Posted: August 06, 2019

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