Energy Market Update: July 2023 Recap

The Shipley Energy Commercial Solutions Team is excited to share with you the July Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market. Read last month’s energy market update here.

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Natural Gas Update
Electricity Update
Petroleum Update


Natural Gas Market Update

The August 2023 NYMEX Natural Gas contract expired at a price of $2.492/mmbtu. This is the lowest settlement price for an August NYMEX contract since 2020 ($1.854) and is down over 70% from last year’s historically high August settlement price of $8.687/mmbtu. The August settlement price continues a 6-month trend of NYMEX prices settling at or below $2.60. The average settlement price over the same period last year (March-August 2022) was $6.89! 

The natural gas supply market remains in a period of low prices thanks in large part to strong levels of natural gas in storage for winter and more than enough available production to meet current demands. The level of gas available in underground storage is currently 18% higher than last year at this time and over 10% higher than the 5-year average. With ample gas in storage, there is less concern for supply shortages during peak winter months. 

However, looking ahead into 2024 and beyond, there are multiple LNG (liquified natural gas) export projects expected to begin service. The U.S. is already the largest exporter of LNG in the world with export levels increasing by 12% within just the first quarter of 2023 alone. With the increase of natural gas produced domestically being exported overseas, the value and scarcity of natural gas supply is likely to increase. The NYMEX market prices for each month in calendar year 2024 currently sit above $3.00 while some winter months in 2025 are upwards of $4.00. These higher prices in further out months reflect the anticipation for higher priced gas when U.S. export levels continue to rise. 

Factors impacting the natural gas markets currently:

  • Hot summer temperatures across most of the U.S. driving down heating demand
  • Levels of gas available in underground winter storage higher than the 5-year average for this time of year 

Action Advice:

The NYMEX natural gas market has hovered consistently around the $2.00-$2.60 range over the past 6 months, among the lowest price levels reached since 2020. Act now to lock in low fixed natural gas supply rates for the next 6-12 months to take advantage of the best available price options based on current market conditions. 

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.


August 2023 Natural Gas NYMEX Settlement Price: $2.492/mmbtu
Last month: July 2023 Natural Gas NYMEX Settlement Price: $2.603/mmbtu
Last year: August 2022 Natural Gas NYMEX Settlement Price: $8.687/mmbtu 



Electricity Market Update

July behaved like an older brother holding a toy just outside of your reach before finally lowering his hand to give it to you. The 12-month forward PPL curve started at 4.38 cents per kWh and moved up several points before landing at 4.26 cents, effectively the lowest point since the early days of Covid. January 2024, which previously had only briefly broken 7 cents, also landed at a new low of 6.51 cents. This is a much rosier picture than last August, when the upcoming January hit a whopping 18.8 cents. (Remember that these are energy-only prices, and do not equate to a fully-fixed price to compare until capacity, transmission, and other components are added in.) 

Even though natural gas closed August in the mid-$2 range – electricity has continued to drop and show more and more opportunity. This is all against the backdrop of record-setting heat in July with renewed reminders of the real effects of climate change. The fact that gas has remained under $3 and electricity has continued to drop during all this signals that the market has a bias against prices going up…for now.

Action Items: 

  • Anyone unhedged through November 2024: Lock it down. It’s a no-brainer, and utility prices to compare are high across the country. If you’re slightly underwhelmed and holding out for something a little better, know that you’re betting that the shoulder season will show up and drag prices down lower. If that bet is wrong, the moment may be gone.
  • Small to midsize users (under 2 million kWh annually) unhedged for 2025: If you can absorb a single-digit percentage increase, get some rates and have a bird-in-hand/two-in-the-bush conversation with your advisor.
  • Larger users renewing in early 2025: the official position among the experts is portfolio approach – buy some, float some. If you’re much more comfortable with simple and fully-fixed products, open yourself up to a 30-minute conversation with your advisor! Maybe we can credibly change your thinking.

Bottom line:

In a 90-second conversation, we can get a sense of your risk tolerance and appetite to play the energy market and help you decide how to capitalize on this moment. Reach out to your Shipley Energy advisor today.



Petroleum Market Update

As noted last month, the market has shifted to a bullish sentiment as petroleum demand fundamentals are gaining as curtailed supply weigh in. With many notable large banks now calling for a “soft landing,” avoiding an economic recession becomes known as a real probability. As recession fears cool and economic activity starts to pick up, distillate supply and stocks remain in trader’s crosshairs.

The past year marked a slowdown in U.S. manufacturing, coupled with lower distillate demand. Recent data suggests that the economic mid-cycle slowdown is nearing its end compared to slowdowns and recessions dating back to the 1940s. Factory orders remain suppressed, which suggests the economic slowdown could persist a few more months, barring any tail risk event or market shocks such as a credit event. Domestic distillate fuel demand for industrial use fell much lower than expected over the last year which does not indicate an impending recession. Distillate inventories are up slightly year-over but are still at 15-year lows.

Emerging Themes and Market Conditions

  • Stronger forward economic outlook
  • Softening US Dollar with stabilization of interest rates and inflation
  • Business cycle expansion
  • Hurricane season could quickly impose volatile price action

Energy prices could come well into mainstream focus once again if demand continues to accelerate while crude oil production remains below global demand. Little is being said at the current moment to talk down prices, but crude oil could be on the verge of a breakout above $83.50, dating back to November 2022. Domestic demand has also been understated and revised higher per the EIA. Pairing the EIA’s higher demand revision and being a stone’s throw away from the shoulder season for heating demand — and include any hurricanes projected to disrupt gasoline and diesel supplies — is a tinder box for price volatility.   

Backwardation has also come roaring back. The winter HO strip has rallied over 20cpg in the last month indicating a strong fundamental rebound and remains cautious into winter heating season. Last year prices fell hard as the Ukraine War risk premium abated, weakening business cycle, no disruptive hurricanes, and a warm winter. We do not think this superfecta will repeat.   


Action Advice:

Price and risk premiums have moved higher, and spreads and backwardation has emerged again. Prices are still relatively reasonable, compared to the highs of 2022. We are not predicting a repeat of 2022 price levels through the end of this year, but we are certainly expecting volatility to spike again. Key in on the front HO spread Sep/Oct for any fireworksIf September HO carries a .05-.06 premium over October we can expect rack basis to rally.

Please continue to speak with your Shipley Energy Fuels Advisor to help your business navigate the current market.


July Market Opens and Closes


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.

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