Our Shipley Energy Commercial Solutions Team is excited to share with you the February Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market.
The end of February was warmer than expected across most of the United States, causing total consumption of natural gas to decrease substantially. This included a 15% decrease in consumption in the residential and commercial sectors.
Lower demand and increased production led to a slight increase in the average natural gas supply. However, with weekly net withdrawals from storage continuing to be higher than the five-year average, the supply-demand balance will remain tight.
As we look forward to spring, the natural gas market is likely to stay volatile. This is especially due to the situation between Ukraine and Russia, which analysts are saying plays a key role in the overall direction of the natural gas market.
Watch the natural gas market update video on YouTube.
We recommend that customers look into fixed natural gas terms in the 24-36 month range to secure their gas supply over a longer term and take advantage of lower prices and less volatility in the months beyond the current 12-month curve.
The forward electricity curve is in a challenging spot for anyone coming off of pre-Covid or early-Covid contracts. We hit a 13-year peak in November, had a brief respite, and have all but returned to that peak in recent weeks.
Forward ‘power prices’ continue to be higher year-over-year, but with weather predictions showing a mild start to March it’s likely that we will see some downward pressure on short-term prices.
The push for corporations to become more socially and environmentally conscious has had a serious impact on demand. Both Pennsylvania and Ohio are proposing new legislation for their Renewable Portfolio Standards that increases the percentages of renewable energy that’s needed to meet state load requirements.
Watch the electricity market update video on YouTube.
Electricity prices are much more palpable when natural gas is closer to $3 and the forward electricity curve is below five cents. However, the reality is that the market basically has only one mover at this point and there’s no short-term relief in sight. If you’re hedged through May, sit tight for a month. But if you’re an April or May start, it’s time to look at pricing and consider either a short-term contract or a product that locks in some of your energy and lets the rest float till a more advantageous time. Your Shipley Energy consultant can walk you through this process and its potential impacts on your budget. These conversations are harder in an up-market, but we are one phone call away in times both high and low.
The crude oil market continues to look bullish, mostly due to the situation with Ukraine and Russia. Commonwealth Bank analyst Vivek Dhar noted that “If a Russian invasion of Ukraine takes place, the global benchmark could spike above $100/bbl”. This statement later proved itself as true the afternoon after the initial Russian invasion. As it stands, United States’ crude oil prices are just below $100, up 40% since the beginning of December.
Also contributing to rising crude oil prices is a global energy deficit due to the Organization of the Petroleum Exporting Countries struggling to hit quotas. Top consumers have been calling for increased production to help cap surging prices, but even if an Iranian deal can be reached, prices will still remain volatile in the near-term because Iranian oil wouldn’t return until later this year.
Watch the petroleum market update video on YouTube.
We continue to reiterate that customers review the impact of overall higher fueling costs impact on cash flows. Historic distillate backwardation continues to project that diesel, heating oil, propane inventory will remain very tight. Winter gasoline demand has held up significantly well as demand continues to rise along with consumer mobility, highlighting how low supplies are. We continue to suggest to review strategies with your sales and marketing advisors to help alleviate upside price risk and overall volatility.
Disclaimer: These market updates are intended solely for informational purposes only. Shipley Energy Company does not warrant or attest to its accuracy. All actions and judgments taken in response to this report are the recipient’s sole responsibility. Shipley Energy Company shall not be liable for any direct, indirect, incidental, consequential, special, or exemplary damages or lost profit resulting from these market updates.Mar 1, 2022
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