Energy Assets Were Not Damaged By Hurricane Ian, & Natural Gas Continued to Decline, is This a Long-Term Buying Opportunity?
In the Sept 19th Energy Update, I explained why I believed the pullback of Natural Gas due to this year’s
In the Sept 19th Energy Update, I explained why I believed the pullback of Natural Gas due to this year’s
In the Sept 19th Energy Update, I explained why I believed the pullback of Natural Gas due to this year’s slow start of the hurricane season was an opportunity to lock in fixed rates for Natural Gas and Electricity.
I said the short-term risk is a major storm in October could impact our energy assets in the Gulf of Mexico resulting in higher Natural Gas prices. Our supplies remain very tight and are projected to be 10% below the 5-year average as we enter the winter heating season, and a major storm could exacerbate the situation.
I also explained since no storms had entered the Gulf of Mexico to draw energy from warm Gulf waters leaving them above normal for this time of the year, an October storm this year would have lots of energy to quickly become a major hurricane impacting our energy assets in the Gulf of Mexico.
Hurricane Ian was a byproduct of this phenomenon quickly becoming a major hurricane, but it did not move into the northern portion of the Gulf of Mexico where our energy assets are located; therefore, Natural Gas has continued to decline reaching a low of $6.31/MMBtu this morning:
In today’s report, I explain why I believe the unwinding of storm risk premium is a Long-Term opportunity to lock in fixed rates for Natural Gas and Electricity.
Risk premium is added to a market to account for possible events that could adversely affect a market. Natural Gas added risk premium as we enter this years storm season because our supplies remain very tight and were projected to be 10% below the 5-year average as we enter the winter heating season, and a major storm would exacerbate the situation.
But with us dodging a bullet with hurricane Ian not impacting our energy assets in the Gulf of Mexico and no storms forecasted at the present time to enter the Gulf the market is pulling out risk premium added to Natural Gas as we entered this year’s storm season.
In the Sept 19th Energy Update, I explained why I believed a short-term pullback of Natural Gas was an excellent opportunity for hedgers to lock in Natural Gas and Electricity long-term. And to fully understand why I believe this you needed to look at Natural Gas prices from a long-term perspective.
My April 11th Energy Update explained in detail why our present administration’s move towards green energy and away from fossil fuels is returning America to a period of high prices and volatility:
The present administration’s commitment to green energy increases the probability the next three years will be characterized by wild swings in energy prices, and securing fixed rates when prices pullback will be in your best interest.
As I explained in previous reports, Natural Gas prices are lower in the forward markets from 2023 thru 2026; and we recommend securing longer-term agreements that include the lower prices from 2023 thru 2026.
And as explained in recent reports, when appropriate our consultants will also help you secure blend and extend agreements to take advantage of an even sharper longer-term pullback if and when it finally comes. The bottom line is we are living in a period of great uncertainty, and we are here to help you navigate these perilous times
Not every client’s risk tolerance and hedging strategy are the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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