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Sunday, 20 September 2020 15:29

PROMPT MONTH NATURAL GAS CONTRACT TUMBLES FOR THE WEEK AS TEMPERATURES IN DEREGULATED MARKETS COOLS OFF. COULD BE WRONG BUT I DO NOT BELIEVE WE HAD A SINGLE WEEK OF NATURAL GAS STORAGE DECLINES THIS SUMMER.

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Prompt month natural gas contract fell 9.7% and settled the week at $2.05 / MMBtu.  The 12, 24, and 36-month contracts were also down, settling the week at $2.86; $2.80; and $2.71 / MMBtu respectively.  Covid 19 continues to crush demand in both power and natural gas.  This is for the liquid Henry Hub delivery point.  The forward natural gas curve signifies a great time to lock in your retail power and gas prices for longer stretches of time.  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 term 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 September 17, 2020 for the week ending September 11, 2020. Natural gas storage in the system saw big increases for the week with the fall seasonal temperatures coming down.  The overall storage level ended the week at 3,614 / MMBtu, an increase in the system of 89 MMBtu.  Natural gas storage levels are 13.2% above the 5-year average, and 17.4% above where they were 12 months ago.  Keep in mind that this is storage in the system.  There are still ample supplies of natural gas in the ground that has yet to be tapped by producers.

Variable rate plans are meant to be pegged to an index that are not necessary tied to the prompt month gas trading levels (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.  Summer season brings the potential for elevated price volatility in wholesale and retail natural gas and power markets.  This is not a risk that customers should be exposed to.

The upcoming week will be the late reporting week of summer cooling degree days.  Do not expect weather to be a factor in natural gas or power demand, and therefore price volatility.

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