Russia Shutting Down Gas to Europe Affect New England
It will double the price of natural gas from the utilities this winter. Russia first reduced supply by 80% for several months and, now, the inevitable happened on Labor Day with the shutting down Nord Stream I natural gas pipeline to Germany indefinitely. It caused the gas market in Europe to jump to $71.00/Dth. It is almost ten times higher than the price in the US. The irony is that the price of natural gas was down after the first day of trading in the US when we came back from the long weekend.
THREE REASONS:
Demand is down because the cooling season is over.
The Liquefied Natural Gas facility in Freeport Texas is still down since June causing an injection of natural gas into our domestic inventory as opposed to exporting it. It is expected to partially open in early October. This will lower US inventories and cause upward pricing pressure.
The ‘R’ word or Recession is causing Traders to hedge their bets.
However, we remain at unprecedented levels and many Traders and Analysts expect prices to keep rising for several years. Ms. Kate Richard from the Warwick Investment Group clearly identified how the market will continue to have upward momentum in an interview on CNBC September 10th. https://www.cnbc.com/video/2022/09/12/richard-the-tail-risk-in-the-oil-market-is-as-high-as-weve-seen.html?&qsearchterm=worldwide%20exchange%20video
This, in my opinion, is an opportunity for New England consumers to lock electric and natural gas supply rates for the next several years. As noted last month, New England’s exposure is during the winter months because of its reliance on liquefied natural gas to offset the pipeline congestion where we compete on the world markets. The premium is already priced into 2022/2023 and the forecast shows natural gas supply rates from New England utilities will average $2.00/therm up from an average of $0.91 last year.
There are solutions that take advantage of lower future rates that are available today. The Neighborhood Energy team is versed to explain the ‘what if’ scenarios along with strategic counsel that will help contain energy costs in a volatile environment.
Thank you for your continued support, your friendly Neighborhood Energy.