Our Shipley Energy Commercial Solutions Team is excited to share with you the October Energy Market Update to keep you informed on trends, weather, and other factors impacting the energy market. Read lasts months energy market update here.
As we move into the cooler season, volatile markets across all energy products are expected. Though for the month of October, several other factors have contributed to the push and pull of the market. Earlier in October, OPEC+, a group led by Saudi Arabia and Russia, announced an immediate reduction of 2 million barrels per day of oil production, the biggest cut since the start of the pandemic. This pullback of oil comprises roughly 2% of global oil demand. This announcement is a cause for concern considering that on October 31st, OPEC updated their 2022 World Oil Outlook and stated that world oil demand will continue to rise for the next decade. Josh Rode, General Manager of Shipley Fuels Marketing, answered crucial questions on how the decision will affect energy markets. You can watch it on our YouTube channel.
In the world of natural gas, the November 2022 Nymex contract sustained the trend of volatile trading. From the end of September until closing on October 27th, the November 2022 NYMEX bounced between $5 and $7. The recent NYMEX trading has been heavily impacted by mild weather across most of the country, which has decreased natural gas demand. Additional factors that will impact the natural gas market over the coming weeks are the continued war between Russia and Ukraine. With natural gas supplies from Russia being cut and disrupted, Europe will need to look elsewhere for supplies. Add that to the onset of cold weather, and we could see continued volatility in the natural gas market.
As natural gas has dropped abruptly in the last month, electricity has followed suit but with a more muted impact. The extreme supply constraints in Europe exacerbated by the ongoing Russia-Ukraine conflict continue to be the dominant market factor in the news; everything else seems like details by comparison. Still, the market has dropped 36% since May and the war is far from over, so there are clearly bearish signals out there. Utility price offers tend to lag the market significantly, with many Pennsylvania utilities now showing their highest prices ever. Met-Ed’s price to compare is nearly 20% higher than their highest price over the summer. Columbia Gas nearly doubled their commercial price to compare, and residential customers saw a 128% increase on October 1st.
With utilities generally on the rise and the open market finally falling, customers who have been patient so far would do well to take another look at their winter and 2023 rates. The team at Shipley Energy is available to help you find the best energy contract for your business.
With 80+ cent per gallon distillate backwardation, we may see a reprieve in the second half of November when two PADD1 refineries are fully up and running, post-seasonal maintenance. This will come at a time when supplies are in high demand, which could provide relief at the wholesale level. If U.S. export and colder weather demand outpace supply, we could expect another basis and cash market roll-up as the Northeast experienced last winter and spring.
Shipley Energy will diligently work with our customers to provide advice on the current supply situation. We expect extreme shorter-term volatility if energy Secretary Granholm imposes a refined products export ban, which is viewed as a potential large-scale disruption to global supply chains.
Please continue to speak with your Shipley Energy Fuels Advisor to help your business navigate the current market.
As natural gas has dropped precipitously in the last month, electricity has followed suit, but with a more muted impact. The Calendar 2023 power price in PPL opened the month at $0.0779/kWh. Trading at the time of writing is at $0.0710/kWh – a drop of 8.8%, or more than half a cent per kilowatt hour. The trading numbers only reflect the energy portion of the overall power price; an all-in fixed price must add in capacity, transmission, and other ancillary charges. When you consider that the average energy rate from May 2022 was $0.1115/kWh, this puts us in a significantly better situation.
The primary factors that could cause electricity rates to bounce right back to summer or spring levels as we head into winter are:
With utility rates generally on the rise and the open market finally falling, customers who have been patient so far would do well to take another look at their winter and 2023 rates. Short-term prices are still the highest, with 2024-26 trading considerably lower than 2023, but choosing a less-than-ideal term is still a much better option than doing nothing. Remember, it’s the customers who “didn’t do anything” as their contracts ended who are shocked to see their winter energy bills triple or quadruple what they’re used to paying.
Energy buying in this market is not a “do-it-yourself” prospect – make sure you are getting expert advice from a trusted supplier or an advisor that will protect your best interests.
Trading bounced between a range of $7.188/mmbtu and $4.750/mmbtu from the end of September until the November 2022 Nymex contract settled on October 27th, continuing the trend of volatility.
The November contract settled at $5.186/mmbtu, down from last month’s October 2022 settlement price of $6.868. The November settlement price is the lowest since March 2022 at $4.568/mmbtu.
The recent Nymex trading has also been heavily impacted by mild weather across most of the country which has decreased natural gas demand.
Additional factors that will impact the natural gas market over the coming weeks are:
With Nymex natural gas market prices dropping to the lowest levels since March 2022, now is an excellent opportunity to consider locking natural gas supply rates. Prices are lower all down the curve, so price options anywhere from 6-36 months may now provide the opportunity to lock in.
Other 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.
November 2022 Natural Gas NYMEX Settlement Price: $5.186/mmbtu
Last month: October 2022 Natural Gas NYMEX Settlement Price: $6.868/mmbtu
Last year: November 2021 Natural Gas NYMEX Settlement Price: $6.202/mmbtu
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.