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Market Update July 2021


June was a painful month for anyone watching the electricity market looking for a dip. The forward PJM 12-month curve leaped a whopping 13% from 3.15 to 3.57 cents /kWh, after seeing peaks even higher. This means a one-year contract for electricity with an immediate start now costs nearly 4/10ths of a cent more than it did in early June. The sharp increase has been felt by customers looking for refreshes on their late 2021 and early 2022 starts, and there are no clear bear drivers in sight to create a sustained drop. Extreme heat and humidity in the northeast, unprecedented droughts in the Western half of the country, and a major jump in natural gas prices only add fuel to the fire in our overheated nation.

Customers renewing in 2021 or early 2022 would do well to expect a 16-22% increase from your last price – especially if you’re in Met-Ed (where NITS charges have more than doubled in recent history) or any utility in Maryland (where renewable portfolio costs continue to rise). Customers with moderate risk tolerance and a little bit of time may do well to wait this out, but there are no guarantees that a refresh in three months won’t make today’s rates look like a steal. Customers with high risk tolerance may want to look at only partial hedges, or even enter into this upcoming winter on an index price with the idea that hourly pricing won’t be as high as the inflated market is betting with forward January and February 2022 pricing.

Customers with a very low-risk tolerance likely don’t have the stomach or bandwidth for those options and should hedge through November 2022 as soon as possible.

Key Points

  • Customers using more than 1 million kWh often have two tools to mitigate the increase:
    • Capacity & Transmission Pass-Thru Prices strip out the demand component from a customer’s per-kWh price and instead pass them through each month at cost. Learn more about Capacity & Transmission Pass-Thru Prices.
    • Peak Shaving is a way customers can time their usage so they avoid paying up to 40% of their price by reducing Capacity and Transmission costs.  Learn more about Peak Shaving.
  • Even with the increase of the last month and beyond, many long-term customers are still looking at their third-lowest price since deregulation. If you’d like a price history for comparison, we are happy to oblige.
  • Capacity (which represents about 15-30% of a customer’s price, depending on the load factor) will drop 64% overall in PJM starting June 1, 2022. However, many suppliers already had very low numbers worked into future models so the early June announcement of these numbers didn’t change much from a pricing standpoint. Met-Ed, Penelec, and PPL will only see a drop of 31%.


There are no easy answers when the market is up, but looking at your company’s risk tolerance for guidance may help. Clients using over 1 million kWh per year can get pretty creative with their options if they’re willing to take on some risk and we are here to help. Those who are smaller or very risk-averse need to make a move sooner than later.

Natural Gas

The July 2021 natural gas NYMEX contract expired at $3.617, a significant increase over the June 2021 expiration of $2.984. The July expiration is the highest Nymex expiration price for any month since January 2019 ($3.642). The continued strength in natural gas market pricing comes as a result of high demand for natural gas to fuel electricity generation. The historic heatwave that has impacted much of the U.S. over the past month has prompted major electricity consumption further increasing power producer’s demand for natural gas. A key factor that traders are keeping an eye out for is the potential for electric generators to opt for coal-fired methods of electricity generation if the pricing of natural gas continues to climb. Lower demand for natural gas for power generation would free up more available gas to be injected into storage for winter and would likely prompt a drop in natural gas Nymex pricing. Another factor to watch currently is the potential disruption of normal natural gas supply processes in the Southeast as a result of Tropical Storm Elsa.

Key Points

  • The amount of natural gas in underground storage for winter continues to trail just slightly behind the 5-year average level for this time of year.
  • Based on current weather models, the West Coast heatwave that has driven temperatures to record highs is expected to continue for the next few weeks or more.


With natural gas Nymex prices at multi-year highs our pricing desk advice is to continue to reach out to your account manager for weekly price updates for opportunities to lock in for renewal during potential price dips in the coming weeks.



Transportation fuel demand has come back into full swing this summer as anticipated. The energy complex from Rbob, Heating oil, propane has been driven in large part by two catalysts. OPEC’s plan to keep global supply under the 2M barrels per day demand deficit through the end of 2021 with only a slight increase of supply. The other is rising inflation. This action has been very supporting of crude prices, which technically took out the October 2018 highs of 76.90 by a few ticks. Prior to that Crude, Rbob, Propane haven’t seen these levels since 2014 with the exception of HO which price is still below Fall 2018 levels. Propane being the best performer of the group with average supply stocks below the 5 year average (which could potentially get much tighter as summer wears on) paired with exception export demand, has kept prices very well bid through the current ~10% retracement of other product front month prices. The 2021/22 winter Propane strip is well above $1. Propane’s performance has been stellar and many market participants are starting to sit up and notice big levels have been taken out easily. With the summer about half over, and domestic stocks not being brought up to sustainable levels we are about 30-45 days out from seasonal start of drawdowns. We agree that the largest factor in slowing the hot export market is higher domestic prices to potentially shut the arbitrage and keep Propane from being exported. Many market analysts and pundits are calling for the return of $100 crude oil by year-end and whether that price is achieved or not, the last 9 months have proven the upward trajectory.

Key Points

  • OPEC+ has kept a lid on crude oil supply through 2021, with US shale still hurting from COVID demand and price shock.
  • Energy price complex at 3-7 year highs.
  • Inflation has come roaring back.
  • Demand for transportation fuels besting pre-Covid levels.
  • Refinery production has returned to pre-Covid levels while gasoline and distillates continue to draw well.


As with priors months we continue to state our theme for balance of 2021 which has been to review your fixed and flexible fuel demands with your account manager.  We have seen the back end of the curve continue to strongly rally with a potential for fall/winter Propane supply shocks, paired with increasing demand, inflation, weaker overall dollar, and a current melt-up in equity markets.

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