Our Shipley Energy Commercial Solutions Team is excited to share with you the January Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market.
The market saw more of a move in the final winter contract (March) vs summer months due to the impending cold, however the more gas we drain from storage, the more will need to be replaced this summer. $5.00 summer gas does feel overdone, however the market is still assessing how much of an additional dent is going to be put in storage with this cold event. Waiting for lower prices is an option, however it will rely on the balance of winter weather backing off a bit. If we see a mild March forecast, then I think waiting would be the best play. We’re keeping a close eye on the End of Season Storage chart in hopes to get some insight on what future pricing will look like. Summer natural gas pricing will be directly impacted by the additional storage draw down. We urge customers to speak with their account managers to discuss options they have available to them to reduce negative cost and budget impact.
After hitting 13-year highs in November, forward electricity pricing took a decent drop heading into the new year before rising sharply again in January.
Recent History of the PPL 12-month Forward Curve
If your current electricity contract covers you through the spring, wait out the winter to see if the current rally softens up. Electricity prices are much more palpable when natural gas is closer to $3 (and the forward electricity curve is below five cents). If you’re a March or April start, it’s time to look at pricing and consider either a short-term contract or (for larger users) a product that locks in some of your energy and lets the rest float till a more advantageous time. But the #1 priority for any energy-buying business right now should be to avoid variable pricing with no ties to the market – for example, the kind you get in Month 13 of a 12-month contract. This is where you open your bill to a surprise of 20 cents per kWh or more.
With historic backwardation indicating higher demand for energy contracts, we continue to reiterate to customers that they should review their budgets and fixed fueling needs. Contracts dated for further in the future are still priced well under near term months. With overall prices at 2010-2014 levels current budgets will need to be reviewed in anticipation for a higher priced fuel environment. This negatively impacts cash flows and financing budgets. Consideration to lock in a partial of budgeting fuel needs should be highly considered.
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.Feb 3, 2022
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