Natural Gas Consolidating Above This Year’s Spring Shoulder Low
Energy News Update June 13th, 2023 Natural Gas Consolidating Above This Year’s Spring Shoulder Low https://youtu.be/H8Yu5qcBYW0 In our April 17th
Energy News Update June 13th, 2023 Natural Gas Consolidating Above This Year’s Spring Shoulder Low https://youtu.be/H8Yu5qcBYW0 In our April 17th
Energy News Update June 13th, 2023
In our April 17th Energy Update we pointed out Natural Gas tends to be lower in the Spring and Fall between the Winter Heating and Summer Cooling seasons, and this pattern is especially accurate when the Spring or Fall lows occur near historically low prices. For example, since 2000, Natural Gas has declined to near today’s unsustainably low prices 4 times; and in each case the final lows were attained either in the Spring or Fall:
They were unsustainable because they were below the cost of production, and companies were no longer profitable near those low prices; therefore, the weaker companies did not survive, and those who did survive were highly motivated to decrease production so they could recoup lost revenue by raising prices.
In our May 10th Energy Update we pointed out In their May 9th Short Term Energy Outlook the EIA forecasted Natural Gas would average $3.49 per MMBtu in the fourth quarter, which would be an 54% increase above the previous day close of $2.27 per MMBtu, and the average price for 2024 would be $3.72 per MMBtu, a 64% increase above the previous day close.
Based on the EIA’s forecast and that in 2012, 2016 and 2020 when Natural Gas was as low as it is this spring Natural Gas was always much higher by the fourth quarter, it is highly likely prices this year will also be higher by the fourth quarter:
Classically, consolidation patterns form when traders are positioning themselves for long-term moves, and the more time it takes for the pattern to form the higher the subsequent move tends to be. This is especially true when the consolidation pattern is formed near an historically very low-price level.
Over many years of trading, we learned past performance does not guarantee future results, but hopefully the above empirical evidence helps you understand after completing the present consolidation pattern, Natural Gas and Electricity prices will likely be heading higher into the end of this year and throughout 2024.
Therefore, if you have an agreement expiring within the next 18 months, we recommend you don’t delay hoping for lower prices and reserve power to be available when your present agreement expires. Our concern is the longer you delay now, the more you may pay later.
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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