Energy Market Update: January 2025 Recap

January 2025 finished as one of the coldest on the record with temperatures dipping into the negatives over a weeklong stretch. Day ahead prices broke $300 and real time spiked over $1,000 at times. Despite that, forward terms were relatively unaffected. The 12-month electricity price at the start of the month was ~$43.09/MWh in Ohio and was $43.75/MWh by the end of the month. In PA, it increased from ~$47.03/MWh to $47.49. Looking at longer terms, the 36-month strip in OH rose $0.06 to end the month at $45.80. PA was similar with only a $0.09 rise to end at $50.82. As we continue to get closer to the start of higher capacity prices on 6/1/2025, end users will continue to see their prices rise as more of these high-priced months are considered in their quotes.

January saw a sharp rise in volatility, and we expect that to continue through the end of February. With the extreme cold and resulting prices fresh in people’s minds, any potential indication of cold will likely bring an outsized market reaction. We continue to see market fundamentals that are worrisome for energy buyers:

• The number of US gas drilling rigs is about 14% lower than this time last year.
• Natural Gas storage injection levels are currently 111 BCF below the 5-year average. A sharp contrast to the surplus we had only a few weeks ago.
• PJM continues to face issues related to its capacity market structure and as a result of cases brought against them, have moved the 26/27 auction to next July. There are initial indications that PJM has agreed to a minimum and maximum rate for the 26/27 and 27/28 auctions that would at least give a more limited range of potential prices. But this change will still need to be cleared with FERC before taking effect.

The wholesale energy markets watch these factors, and changes can push prices up or down on a daily basis. Based on where we stand now, we recommend evaluating these strategies:

• Although we’re likely through the coldest part of the year, there’s still the potential for price increases if we get sustained cold to finish the winter. We recommend locking in your energy price through the next 12 months as soon as practical.
• If you would like to lock in longer terms, consider a capacity passthrough structure. These contracts avoid the premium that suppliers typically add to account for unknown rates.
• Invest in a plan to reduce your peak demand and overall energy consumption, if you haven’t already. With the looming rise in capacity prices, lowering your associated PLC tag could have substantial price benefits for the following year.
• As you budget for 2025 and beyond, expect prices to be higher than you are paying now. Watch for changes in weather trends as sustained cold will push prices higher for the remainder of winter and into summer.

Want to help your business navigate the current market? Get started with your Shipley Energy Advisor today!

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Natural Gas Market Update

The February 2025 NYMEX natural gas contract expired at $3.535/MMBtu. Cold weather in January brought volatility to natural gas markets, particularly when it came to the daily spot market.

• Texas Eastern M3 peaked at $40.015/dth.
• UGI was under a Critical Day from Jan 4th to Jan 26th.
• Enbridge Gas Ohio had Operational Flow Orders for a week around the Martin Luther King Jr. Day weekend.
• Natural Gas interruptions were also called by utilities, causing some businesses to switch to back up fuel supplies.

Two Ohio utilities announced rate hikes, with Columbia Gas nearly doubling ($3.25/Mcf from $1.66/Mcf) its Retail Price Adjustment and Enbridge Gas Ohio increasing by 150% ($0.50/Mcf from $0.20/Mcf). These auction results are still pending PUCO approval. The Retail Price Adjustment will be added to the NYMEX closing price for the prompt month to set the Standard Choice Offer rate.

Aside from weather, another potential impact to natural gas markets is President Trump’s proposed 25% tariff on Canadian and Mexican imports.

Another potential impact to natural gas markets is President Trump’s proposed 25% tariff on Canadian and Mexican imports. With colder weather and increased market volatility, speak with your Account Manager to find out if now is a good time to lock in your 2025/2026 natural gas needs.

Factors impacting the natural gas markets currently:

• Pulling gas out of storage (Bullish)
• Uncertainty in the direction of temperatures and degree days (Bullish)

Action Advice: As colder weather has arrived. Speak with your account manager today to see if now is the right time to lock in your 2025/2026 natural gas needs.

Other rate options include Basis Only or NYMEX Lock deals to separate the two elements of your natural gas supply price to look for potential value vs standard Fixed pricing. Ask your Account Manager for details.

January 2025 Natural Gas NYMEX Settlement Price: $3.514/MMBtu
Last month: December 2024 Natural Gas NYMEX Settlement Price: $3.431/MMBtu
Last year: January 2024 Natural Gas NYMEX Settlement Price: $2.619/MMBtu

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Petroleum & Refined Products

Regionally, a very cold January ushered in a strong surge of heating and distillate demand. Pipe and rack basis reacted swiftly, jumping ~10-20cpg.  Due to the extended extreme cold, a string of refinery and pipeline upsets occurred both regionally here in PA and across the southern and Midwest regions.  This was the first sustained cold weather the East has witnessed in years.

Front month HO futures traded 10cpg over second month futures at the highs.  This type of backwardation structure has not been witnessed in the market since dating back to the supply crisis of Russia/Ukraine and Hamas conflicts of 2022-23.  In addition to the supply constraints the global oil market has been creating sustained volatility in regards to US tariffs on Mexico and Canada, which have been delayed for 30 days.  China has announced reciprocal tariffs of 10-15% on US crude oil.

Taking everything into account, news headline price risk volatility has returned to the market which will impact prompt fuel pricing downstream at the racks, as well as the forward heat curve which is currently 20cpg cheaper for next winter.  The economy is staged to grow which has a positive correlation to a increase with diesel demand.  US ISM Manufacturing returned to expansionary territory for the first time in over a year.

Winter demand is still very strong, while the broader market is still dealing with product shortages with both distillate and propane. Having contracted volume with Shipley Energy protects your supply chain to you and your customers.

Our supply and trading team has deep and diverse supply options to deal with refinery and pipeline outages and constraints. We also take pride in our wholesale fuel division’s large in-house transportation fleet, which works very closely with the supply and trading team.  This relationship is further strengthened when supply constraints hit the market and we are able to easily streamline supply to delivery.

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Disclaimer: The market update is 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.