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Energy Market Update: September 13, 2019

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Not long ago, NYMEX natural gas prices were setting new lows. But summer, like all good things, is coming to an end, and natural gas prices are reacting pointedly.

Get Direct Energy Business Strategist Tim Bigler’s take on the market’s new direction in this week’s Energy Market Update.

 

November to March winter strips were setting one-year-lows as recently as late June, when 2019 to 2020 strips were changing hands between $2.40 and $2.50 per MMBtu. June also saw 2020 to 2021, 2021 to 2022 and 2022 to 2023 strips trading at their lowest prices in more than a year (hovering mostly near $2.60/MMBtu).

As summer has wound down, these same strips have reversed course and are now trading at higher prices than we saw over the summer. Natural gas production issues, pipeline issues and new demand caused by late-summer heatwaves are all likely culprits for the recent spike in prices; additionally, “managed money” investor activity has likely played a role in price fluctuations.

The 2019 to 2020 strip has certainly spiked the most, having risen from $2.40 up to $2.75 territory; strips for the following three winters have also risen (albeit more modestly) and are trading between $2.60 and $2.70. Though these prices represent an increase in the short-term, the strips in question are still trading below their prices at this time last year.

Buyers in winter markets—i.e., the Midwest, Northeast and other cold-climate parts of the country—have seen higher basis prices (regional price relative to Henry Hub price) for natural gas in addition to expensive NYMEX futures. Fortunately, prices for this coming winter are the only ones that have truly shot up, with later winters experiencing less volatility; this means that the market is once again in “backwardation” and that now is still a relatively good time for buyers interested in longer-term futures.


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Posted: September 13, 2019

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