Commodities Prices To Move Higher In 2021

It is no secret that energy prices have been in a funk for some time. We experienced negative quotes on oil in April while natural gas was trading at lows unseen since 1995 in June. The reasons for the lower rates are different for each commodity. The pandemic coupled with the disagreement between Russia and Saudi Arabia caused oil to drop while mother nature was kind to us last winter that boosted inventories for natural gas. The cause and effect are that producers scaled back production. There are 252 active wells in the USA down from 1270 in 2019; a decrease of over 70%. Although prices are still benign, the impact can be significant if we have a ‘normal’ winter. A below-average temperature will result in rates unseen since 2010 when gas was trading over $5.00/Dth. The Energy Information Administration (EIA) has upped the forecast for natural gas to $3.40/Dth come January 2021.

EXCERPT FROM EIA SEPTEMBER 9, 2020: 

“In August, the Henry Hub natural gas spot price averaged $2.30 per million British thermal units (MMBtu), up from an average of $1.77/MMBtu in July. Higher natural gas spot prices reflect rising demand for natural gas from the U.S. electric power sector as a result of warmer-than-normal temperatures during August and rising demand for U.S. liquefied natural gas (LNG) exports amid declining U.S. natural gas production. EIA expects that rising domestic demand and demand for LNG exports heading into winter, combined with reduced production, will cause Henry Hub spot prices to rise to a monthly average of $3.40/MMBtu in January 2021. EIA expects that monthly average spot prices will remain higher than $3.00/MMBtu for all of 2021, averaging $3.19/MMBtu for the year, up from a forecast average of $2.16/MMBtu in 2020.”
 
The good news is that many of you took advantage of the low water level and locked fixed rates that will reduce spending in 2021. The second bit of good news for those who have third-party agreements coming to term within the next 6 months, a window of opportunity remains for low rates. The suggestion is to prioritize the activity of enrolling as soon as possible to secure budget certainty and likely to outperform the utility default rates. We specialize in making your pennies scream!

As always, stay safe.
Your Friendly Neighborhood Energy!