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Saturday, 02 November 2019 17:39

NOVEMBER MARKS THE BEGINNING OF HEATING DEGREE DAY TRACKING. WINTER SEASON BRINGS COLD WEATHER AND HIGH DEMAND FOR NATURAL GAS HEATING PRODUCTS. HEDGE THIS RISK IS WITH FIXED PRICE POWER AND ELECTRICITY CONTRACTS.

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Prompt month natural gas contract shifted to December, and settled up 18% for the week at $2.71 / MMBtu.  The 12, 24, and 36-month contracts also traded up for the week, settling at $2.52; $2.50; and $2.51 / MMBtu respectively.  Expect the prompt month natural gas contract to experience price volatility due to colder weather conditions.  Those customers on variable price plans will see the volatility in their unhedged power and gas prices.  Take risk off the table with the low spread environment.  Allow your ESCO supply company to work for your business or residence, and manage market volatility with fixed price contracts for term length.  Variable rate contracts do not offer price protection (or value) in my own opinion.

New gas storage levels came out on October 31, 2019 for the week ending October 25, 2019. The overall storage level ended the week at 3,695 / MMBtu, an increase in the system of 89 MMBtu.  Natural gas storage levels are 1.4% above the 5-year average, and 17.8% above where they were 12 months ago.  Keep in mind that this is storage in the system.  As you can see from the charts, the storage levels are below historical averages, but there are still ample supplies of natural gas in the ground that has yet to be tapped by producers.  As we approach the hi gas demand winter season, keep an eye on the relatively low gas storage inventory levels.

Variable rate plans are meant to be pegged to an index (keep these market movements in mind when evaluating comparable billing periods!). While pass through components such as capacity and ancillary services costs have come up, the commodity itself remains in check.  As a customer, you have the choice to decide who holds the price volatility risk.  Protect yourselves with fixed price contracts.  Those customers who elect a variable rate plan are 100% exposed to price volatility driven by weather and other market conditions.  Allow your supply company to do their job and manage the volatility by offering you a fixed price contract.

Attractive opportunities are in the market for customers to hedge out price volatility.  Keep the risk where it belongs, with your well-seasoned energy supply partner.  Winter season is arguably the high point of wholesale natural gas and power price volatility.  This is not a risk that customers should be exposed to.

There is no current storm activity on the Atlantic Coast.

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