January Energy Market Intel Webinar Insight
During Constellation’s January Market Intel Webinar, principals from our Commodities Management Group spoke to topics such as how the recent cold snaps in the U.S. set a new single day record for gas demand, a fundamentals overview, pipeline infrastructure updates and regional volatility matters. If you were unable to attend, you can listen to the recording of the January webinar broadcast here.
After the webinar, our attendees asked insightful questions that are pertinent to their unique business needs. We’ve highlighted one of those questions below with an answer from our market professionals.
Q: Given the uncertainty in supply and demand drivers, when would you recommend locking prices in for winter 2018-2019?
A: There will always be uncertainty with supply and demand drivers. Since power and natural gas markets are heavily influenced by weather, making purchases before or after a high demand event – a cold winter or hot summer – could provide the option to lock in prices for a forward term. However, the difficulty is trying to time an all-in, one-time purchase since prices are influenced by multiple other factors as well. A diversified energy strategy that allows you to make smaller purchases over time will give you opportunities to buy when the market drops.
If you take a look at the NYMEX prompt month prices in the chart below, you’ll see the significant role weather can play. NYMEX reached a high of $3.99/MMBtu in the cold months of December 2016 – January 2017. At the same time, production declined to 70 Bcf/day before pulling back with warmer weather in February 2017. The market adjusted for lower production and prices rose through May 2017 when production started to recover. Prices remained range-bound over most of the summer and fall within a 50-cent range of $2.75-$3.25/MMBtu.
A warm start to December 2017 plus gas production surging to new all-time highs drove NYMEX prices as low as $2.56/MMBtu. Cold weather later in the month through the first half of January 2018 drove prices higher by $1/MMBtu.
If you’re considering locking prices in for winter 2018-2019 and are interested in developing a diversified energy strategy, Constellation’s MarketWatch tool could be beneficial for your business. This tool allows you to monitor changes in the market so you can set up alerts and automatic purchases based on the unique needs of your business.
Join us on February 21st for our next webinar to continue learning about current energy market trends. This month, our energy market professionals will discuss how crude oil markets will impact forward contracting decisions for power and natural gas markets in 2018.