Our Shipley Energy Commercial Solutions Team is excited to share with you the June Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market.
After five straight months of price increases, the electricity market finally saw a sharp pullback in June prompted by significantly reduced natural gas pricing. The forward PPL 12-month curve dropped 33% from a whopping 11.15 cents down to 7.43. It’s still extremely high compared to pre-Covid rates of 2.65 cents, but the opportunity for near-term renewals just got a lot less ugly.
Most of the market fundamentals still support a bullish market: historic inflation, post-pandemic recovery, a natural gas storage deficit, and of course the war in Ukraine. However, the Supreme Court’s decision to severely limit the EPA’s authority combined with the shutdown of a the Freeport LNG (liquified natural gas) facility created enough bearish news to send prices plummeting. In addition, the critical non-energy price component of Capacity went down significantly when auction prices for a June 2023 start cleared far below expectations.
April 2023 and beyond continues to show the best opportunity, though the gap between today’s pricing and April’s has thinned out considerably. This means there’s opportunity for 2022-renewing customers who waited in the face of extremely high rates to do significantly better, as well as 2023-renewing customers to jump on attractive forward rates before they start to look at lot like where 2022 has been.
Major disruptions in physical supply at terminals across Pennsylvania and the East Coast are causing some suppliers to come up short, unable to provide basic supply to their customers. The US continues to export diesel and other distillates to areas around the world, creating higher prices and shrinking domestic supply. In addition, inventory is still well below pre-covid levels.
Will Muller, Business Development Manager, said in an interview with Shipley Energy spokesperson, Ron Martin, that:
“Shipley Energy is ensuring our customers that we have the supply they need readily available and that scheduled deliveries continue to go out on time. For businesses who are not Shipley Energy customers already, we’re suggesting that they partner with us. We have over 15 bulk plants located all across central Pennsylvania and the Baltimore area. We also have 150 delivery vehicles ready to keep tanks and trucks full. We offer 4 pricing tiers for our diesel, so we can work with any budget and help find the best plan for each business. We deliver several million gallons of both diesel and propane to our commercial customers annually.”
Shipley Energy Commercial Fuels Territories and Bulk Plants
There hasn’t been much volatility in the propane market recently. While we’re seeing increases in pricing, it’s not nearly as noticeable as the diesel markets. There’s really no concerning seasonal factors with propane. Of course, summer prices are generally lower than winter prices due to lower usage and varying basis differentials. We have a lot of customers, especially in the agriculture industry, that lock in summer rates for winter usage.
Winter propane pricing typically starts at the beginning of October. We have a few different pricing options that customers can choose from for their propane needs. Our team works with each business to individually determine the best pricing plan that coincides with their usage profile. We want to ensure our customers’ are getting exactly what they need when they need it.
With the recent collapse in energy and other commodities we strongly urge customers to review their budget and risk for the balance of this year into 2023. With the market structure still in steep backwardation after such a selloff, the forward curves are still pointing towards a growing demand environment. In our view the nearer to mid-term pricing environment has created and opportunity to lock in fuel demand. Basis and cash markets have found balance, which allows Shipley to provide customers peace of mind taking down price risks. This year has put serious strains on fuel budgets for those who did not lock in during a rebounding demand environment. We continue to reiterate that customers review their fuel demand, layering in sections at a time. Please discuss variations to traditional fixed forward and cap programs with your advisor.
The explosion at the liquid natural gas facility in Freeport Texas has put almost a 5th of US capacity out of commission. The Freeport LNG export terminal is expected to be shut down for three months, bringing 2.5% of total production back into the domestic market. Analysts are suggesting that this will result in an increase in US storage injections, thus bringing significant market relief. July NYMEX has fallen to a 5-week low, pushing natural gas below $7 for the first time in more than a month.
Recent dips in natural gas pricing driven by the outage of the Freeport LNG facility and other factors have created opportunities to lock in natural gas rates. These rates are some of the lowest pricing the market has seen since March/April. Reach out to your Account Manager today for price quotes on both shorter (6-12 months) and longer term (24-36 months) price options.
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.