Short trading week with the Christmas holiday saw declines across the curve with the prompt month trading down 6.7%, settling at $2.52 / MMBtu. The 12, 24, and 36-month contracts were down, settling at $2.63; $2.61; and $2.56 / MMBtu respectively. Covid 19 continues to crush demand for 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. Spreads between the short term and long-term natural gas contracts are compelling and continue to support the decision of locking your power and gas rates for longer stretches of time. 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 December 23, 2020 for the week ending December 18, 2020. The overall storage level ended the week at 3,574 / MMBtu, a big cold weather driven decrease in the system of 152 MMBtu. Natural gas storage levels are 6.5% above the 5-year average, and 8.4% 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. This is not a risk that customers should be exposed to.
We are now tracking the heating degree days for some of the larger deregulated retail supply markets. Heating degree days are a great indicator of demand for natural gas moving inter the cold winter season. See our bar charts to track your specific location.