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The holidays have come to an end and things are starting to get back to normal, excluding the weather. Saturday, January 11th set record highs in some parts of the Midwest as temperatures maxed out in the upper 60’s. As we might expect, energy prices have subsequently sagged throughout the holiday season and into the start of 2020.
Monday, December 16th saw prompt month January 2020 prices finish the day at $2.341. Over the following six trading days, the prompt month fell nearly 17 cents or 7.2 cents where it finished on Christmas Eve at $2.172.
Following Christmas, the January 2020 contract had just two trading days left before it expired. As we have mentioned, days when many are out of the office can lead to some highly volatile trading. Such was the case when the January 2020 contract surged 12.2 cents on December 26th, and then dropped 13.6 cents on December 27th, its expiration day, to ultimately finish at $2.158.
The January 2020 settlement marked a 31.2 cent drop from December 2019’s $2.470 expiration price. It was also nearly $1.50 lower than January 2019, which expired at $3.642. Contrary to current weather, January 2019 featured some severe cold weather with higher withdrawals, which led to increased pricing. The $2.158 expiration price is the second lowest settlement since the summer of 2016, lower than all months except August 2019’s $2.141 expiration.
Since February 2020 took over as the prompt month, prompt month prices have found a comfortable home in the $2.10 to $2.20 range. The largest single day move has been just 6.7 cents. With moderate weather and healthy inventories, the market is struggling to find any reason to move out of the current range. However, forecasts are starting to finally call for some winter weather to show up in late January, so it seems as though some traders are hanging out to see if any weather materializes.
Inventory levels to start 2020 have stayed strong with smaller than normal withdrawals due to the lack of weather. 2020 levels are currently more than 500 BCF above last year and that delta is only expected to increase in the coming weeks. Even more telling is that we are 74 BCF above the 5-year average and again that surplus is also expected to increase.
The simply summary is that weather has been non-existent, inventories are strong, and both near and long term prices look quite attractive compared to all historical benchmarks.
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