Natural Gas Prices Again Increasing After Testing October’s Seasonal Low
In my Nov 29th Energy Update, I said we were entering the fall shoulder period in which demand for Natural
In my Nov 29th Energy Update, I said we were entering the fall shoulder period in which demand for Natural
In my Nov 29th Energy Update, I said we were entering the fall shoulder period in which demand for Natural Gas and Electricity is lower between the summer cooling and winter heating periods, and the Fall Shoulder low was reached as anticipated in late October.
Prices initially moved higher, but the rally was short lived due to warmer than expected weather early in December and Freeport LNG announcing on Dec 2nd, further delays in the restart of operations to export liquefied Natural Gas overseas, and Natural Gas declined to retest its Fall Shoulder low:
Prices declined when Freeport LNG moved their forecast for resuming operations to year end, pending regulatory approval, and their restart must be approved by U.S. safety regulator Pipeline and Hazardous Materials Safety Administration (PHMSA), I am concerned the PHMSA has not yet signed off on a complete repair plan, and further delays are certainly possible.
Delays in Freeport LNG exports to Europe keeps more supplies here for our needs, which tends to lower our prices short-term, but it also means less fuel will be exported to European countries that desperately need to replace Russian gas, thereby increasing demand for our LNG and support higher prices long-term when Freeport finally comes back online.
Therefore, I believe the successful retest of the Fall Shoulder low indicates Natural Gas prices are poised to move higher, and NOAA’s most recent forecast of much colder than normal weather in the second half of December increases the probability prices will be moving higher:
As I pointed out in my Nov 29th Energy Update, Our 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 pull back will be in your best interest.
The 20-year chart below shows where prices have been long-term, and the impact of America moving away from Fossil Fuels to Green Energy:
No one knows for sure where prices will go month by month, but from a long-term perspective I believe prices in the forward markets offer good value for hedgers. Natural Gas is lower in the forward markets than present prices; and we recommend securing longer-term agreements that include the lower prices from 2024 through 2026. where the average price of Natural gas is $4.58 per MMBtu. Remember the old proverb, “A bird in the hand is worth two in the bush”!
Month | 2023 | 2024 | 2025 | 2026 |
Jan | 6.83 | 6.08 | 5.28 | 5.35 |
Feb | 6.61 | 5.79 | 5.08 | 5.13 |
Mar | 5.97 | 5.08 | 4.69 | 4.74 |
Apr | 5.18 | 4.19 | 4.15 | 4.13 |
May | 5.13 | 4.12 | 4.09 | 4.08 |
Jun | 5.19 | 4.19 | 4.17 | 4.15 |
Jul | 5.28 | 4.19 | 4.25 | 4.24 |
Aug | 5.28 | 4.22 | 4.29 | 4.27 |
Sep | 5.21 | 4.28 | 4.28 | 4.26 |
Oct | 5.28 | 4.29 | 4.37 | 4.35 |
Nov | 5.52 | 4.59 | 4.69 | 4.67 |
Dec | 5.84 | 5.06 | 5.11 | 5.07 |
AVG | 5.61 | 4.67 | 4.54 | 4.54 |
And as explained in recent reports, when appropriate our consultants will help you secure blend and extend agreements to take advantage of unexpected longer-term pullbacks if they come. 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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