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Energy Market Update: March 6, 2019

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Let’s go one year back in time.

In March 2018, NYMEX natural gas futures contracts for next month (April 2019) were relatively inexpensive. As time went by, however, prices rose. And today’s spot contract costs considerably more than last year’s futures contract did for the same product.

This trend holds true until about a year from now, when things start to get interesting. Tune in to Direct Energy Business Strategist Tim Bigler below to find out why.

 

Let’s summarize: prices are higher now than they were a year ago for consumers buying futures contracts through April 2020. In April 2020, however, the trend appears to invert. Anyone interested in buying futures contracts for natural gas after April 2020 will find that prices today are lower, often significantly lower, than they were a year ago for the very same contract.

Prices have not yet reached the $2.40 support, which some analysts have identified as a “break even point”, but some of the reasons for the recent price drop suggest that prices could even drop below this point as well. Let’s explore why.

Recession Fears

Some broader economic indicators point to a possible recession coming into effect over the next 24 months.

Renewables Peak Shave

Solar energy during the summer months and wind energy during the winter months could both contribute to peak shaving, which drives down demand and keeps prices lower.

Global LNG Glut

The U.S. is exporting more liquefied natural gas (LNG) than ever before. These operations could be hindered by a global glut of LNG, with the threat of a recession driving consumption and prices, both stateside and around the world, even lower.

Permian Basin NG Glut

The Permian Basin in Texas produces almost a third of United States oil. The region also produces natural gas, but is experiencing pipeline constraints and producers are flaring more gas than expected. Ideally, these constraints will be lifted in 2021.


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Posted: March 06, 2019

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