The Shipley Energy Commercial Solutions Team is excited to share with you the March Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market. Read lasts months energy market update here.
Natural Gas Update
The April 2023 NYMEX Natural Gas contract expired at a price of $1.991/mmbtu. This is the lowest price for a NYMEX settlement since August 2020 ($1.854). As we enter Spring following a markedly warm Winter, Nymex natural gas prices have fallen back to pre-pandemic level lows largely due to low heating demand. The prompt NYMEX contract of May 2023 is currently trading in the $2.20-$2.25 range.
Fears of supply shortages in the U.S. and Europe have been abated given the warmer-than-anticipated winter weather and ample supply available in storage. The mild winter temperatures have allowed U.S. supplies of natural gas in underground storage to surge ahead of the 5-year average level for this time of year.
The Freeport LNG facility in Texas, which has been offline since June 2022, has now returned to full operating power and is receiving deliveries of natural gas up to the full capacity of 2 BCF (billion cubic feet) per day. At full operating power, Freeport accounts for approximately 20% of the total U.S. LNG exports. There will now be less gas available domestically to meet demands with Freeport returning to full capacity. But, with winter behind us, there is the feeling among traders that the impact on NYMEX prices may be less significant.
With mild temperatures and ample gas available in storage, the NYMEX natural gas market has reached low prices not seen since the peak of the Covid-19 pandemic. Now is an excellent time to look to lock-in fixed natural gas supply rates for the next 12 months (May ‘23-Apr ‘24) in particular. Act now before Summer when demand for natural gas will start to climb to fuel electricity generation.
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.
April 2023 Natural Gas NYMEX Settlement Price: $1.991/mmbtu
Last month: March 2023 Natural Gas NYMEX Settlement Price: $2.451/mmbtu
Last year: April 2022 Natural Gas NYMEX Settlement Price: $5.336/mmbtu
The PJM electricity market is showing a mirage. You might see what looks like long-awaited buying opportunity reflected by the lowest front-month natural gas pricing in almost three years–only to find as you run toward the image that it’s just the beginning of the story, and 2024 and 2025 are decidedly higher.
If you find yourself unhedged for the rest of 2023, this is your moment. Whether you intended to wait or just lost track of your contract, you can lock up the rest of 2023 at a severe discount compared to anything you could have locked in the last two years. Even so, adding in Jan-March 2024 will significantly impact your future price.
To that end, some customers are looking at the 2023 drop and deciding they’ll just wait for 2024 to do the same. The reality is, however, that there are simply too many bullish factors going forward to justify ‘24/’25 pricing going much lower. The most obvious of these bulls is the continued growth of liquified natural gas. With the complete return of the Freeport facility, there’s an anticipated increase in demand for LNG offshore demand each year, to the tune of billions of cubic feet annually.
What may look like a calm market is actually the bottom of a three-month drop in search of volatility. 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.
During the first half of March, petroleum and refined products fell victim to banking and systemic financial risk. Leading up to the crisis, inflation data had somewhat cooled but not enough for the Federal Reserve to take their foot off from hiking interest rates.
Diesel demand and prices have been tightly correlated to trucking and manufacturing data. Much of the global slowdown is still affecting near term prices, but we are seeing a positive increasing trend of volume shipped. The durable goods inventory cycle is improving, which is helping high inventory levels come down, which is expected to help support an increase in freight and diesel demand as goods start moving again. Gasoline demand seasonality and prices have moved upside sooner than expected.
March also marks the end of seasonal refinery maintenance. Numerous refineries went offline and underwent much needed maintenance, due to increased output and production while taking advantage of above average margins in 2022. March also marks the shift away from winter gasoline spec into summer gasoline spec. The market appears poised to continue to move higher.
We remain constructive as refined product prices and demand steadily increase. The crude oil market will continue to tighten and potentially curb some refinery output if higher crude input prices hamper margins. The forward heating oil curve still appears very appealing through 2024, with budgeted levels coming in around half of where they were during the peak prices of this past year. The March HO low was $2.5021, which we pointed out from our weekly market update as an area of strong multiyear support.
We feel that there is a good risk/reward opportunity to lock in future strips down the curve in the back half of 2023 and beyond. The week of 3/16/23 low of $2.5021 proved to be an excellent area for customers to consider partially locking in their remaining 2023 fuel balance and beyond. If WTI crude oil can trade above the 4-month area high of $82.50, it would set HO and RBOB contracts for a higher sustained move into increasing summer demand.
Many customers have reviewed their budgets for fuel and have locked in the prompt and deferred levels. Please take advantage of discussing fixed and floating price programs your Shipley Energy advisor can offer you.
Please continue to speak with your Shipley Energy Fuels Advisor to help your business navigate the current market.
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.