May 2019 - Monthly Market Update

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Monthly Market Update 

Electricity
Last month we pointed out that the forward 12-month PJM price curve has fluctuated between 3.33 and 4.06 cents since August. This week it touched down at 3.35 cents, practically meeting the now eight-month low.
 
Customers whose next contract starts later in 2019 have now stretched the gas tank well past “E” and it’s time to lock in. Customers renewing in 2020 or later, however, likely fall into one of three groups. The first group sees the eight-month low as an excellent opportunity and is looking at forward pricing now before it bounces back. The second group is still bearish and wants to see what happens if the market should break that 3.33-cent floor. The third group is locked in far enough out that their next electricity contract is too far out of mind.
 
Those who fall into one of the latter two groups would do well to set specific goals as to how low they’d like the market to get before they receive a call – a “stop order” in a sense. Otherwise they risk missing the opportunity altogether.
 
Natural Gas
Limited residential and commercial demand for natural gas coupled with strong production has led to free-falling Nymex prices. Basis pricing remains largely unchanged, with some upward price action coming out of Easter weekend. If NYMEX continues to drop, you may want to lock in basis. We could see a rise in basis, since they often are reciprocal. 
 
Market Outlook: Potential opportunity to lock in Nymex prices for winter 2021 and 2022 at current levels, current downward trend could reverse once summer heat
drives up demand.
 
Petroleum Products
Gasoline was again the big winner this month with futures gaining another ~20 cents and easily eclipsing $2, levels not seen since last fall. The continuation higher has largely been due to many refineries across the country going down for unplanned maintenance. This caused a refined products shortage that mostly impacted gasoline stocks. 
 
Crude oil has also continued higher for the month of April, gaining $5 and posting annual highs for the year. OPEC has continued the theme of lower output production cuts, which will not be reviewed until June. 
 
April also marks the start of the summer months for propane. The normal expectation is for prices to recede during warmer months as domestic demand falls off but this year propane domestic propane exports are seen substantially rising. In part, this is due to increasing pipeline infrastructure coming online from the Marcellus Shale in Pennsylvania and being exported mainly to Asia from Marcus Hook.  
 
Market Outlook: Refined products prices to remain well supported throughout the summer driving season as new fundamental drivers are seen to be impacting supply and markets worldwide.
Market Summary - Energy
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