Lots of volatility this past week in the market caused by colder temperatures in markets open for choice. The prompt month was up $0.27 cents, or 8%. The 12, 24, and 36 month strips all saw increases between 6% and 4% respectively. The week ended with the 12, 24, and 36 month spreads were all off around 25% from the prior week’s. This represents a buying opportunity for locking rates in over longer periods of time to protect against future far term movement in the curve. The $4.00 level has been hit which could mean that there is a risk that markets may run away, or there could be a correction to the downside from this week’s run up.
New gas storage levels came out on October 10, for the week ending October 4. The data showed 3,577 Bcf of gas in the system, up 90 Bcf from the previous week, or up 3%. The prior year’s report ending the same week showed 3,715 Bcf in the system, so the levels have come down 3.7% vs. the comparable period a year ago. That being said, present gas in the system is at around the 5 year average of 3,522 Bcf.
If one looks at the charts for Cal 12, the 12, 24, and 36 month strips were around the same $4.00 mark, however the market experienced a lot of volatility in the winter season. With colder weather making a significant impact on the market this past week, customers should see this as an opportunity to lock in their rates for the winter season with a 6 month fixed price product. Customers who do not wish to pay a premium for the lock can elect to float with a variable price product, opting to accept the risk of higher prices due to increased heating demand.