Energy Price Outlook
It is nearly September already...why does the summer go so fast! The Atlantic hurricane season is upon us and I hope everyone came through Irene without too much property damage. As of this writing there have been ten named storms with two more potential weather systems in the wings. We will have to hold our collective breaths through October before we can relax. Once the threat of hurricanes is diminished and Summer passes a buying opportunity will present itself and if you are looking to procure energy the Fall will be a great time to buy.
The economy has temporarily become the most important factor in determining energy prices. S&P's downgrade of the the U.S. credit rating may have been the last straw for those economists anticipating a better second half for the U.S. economy. At this point the markets are just trying to determine how slow economic activity will be. As a result natural gas and power forward markets nudged down roughly 5%.
Natural gas injected into storage lags last year and the five year average. Since early July though, the amount of natural gas injected into storage has exceeded expectations and the gap is closing. A weaker economy will add to supply which could allow prices to fall off again prior to the summer.
While there have been ten named storms this hurricane season, (Jose is the latest) there has not been any major disruption to natural gas production. The hot weather though has created new peak consumption in Texas, New England and the Mid-Atlantic(PJM) with New York just barely missing a new peak has mitigated the impact of supply on prices.
Outlook and Buying Strategies:
All of the major indicators, the economy, weather and supply are pointing to a weak market ahead. When the market gets past the hot weather and the hurricane season, there is a good chance that prices will drop further from the levels we are currently seeing.
Possible strategies include:
- Energy may be a great buy in the early fall. Consider longer terms prices because there is very little premium when adding a second year to your contract.
- Return to utility service for the fall and time your next contract to begin in November.
To understand how these strategies apply to your business call Howell Energy Consulting to to create a procurement plan for your organization.
|About Derek Howell
With over 30 years in the energy industry and 12 years of experience in the deregulated energy business, Derek Howell's expertise covers the broad expanse of the electricity and natural gas markets.
Prior to the founding of Howell Energy Consulting. Mr. Howell was Direct Energy's Director of Retail Pricing for New England and New York regions.