Winter Forcast: The True Natural Gas Price

Last month, we discussed the possibility of natural gas breaching $7/Dth this winter with an upside of $14 because of Producers keeping supply flat and a colder than expected winter. The dynamics remain. The power-generation fuel has been in high demand to run air conditioners and forecasters expect booming exports and more steamy weather to keep supplies down and prices up. Natural-gas futures have gained 37% since April and are more than twice the price of a year ago. It settled at $4.127 per million British thermal units at the end of the first week of August.

How has the increase of natural gas impacted future electric and natural gas rates in New England? First let’s look at current electric rates from a handful of utilities followed by their forecasted rates for January 1, 2022. The forecast is based on the futures market. As a baseline, regulated utility rates are set every 6, 3 or every month. The differences are hefty. It is my belief that retail natural gas will have similar increases for this winter versus last.

The highest summer gas prices since 2014 have yet to entice producers to send many more drilling rigs into their fields, though. After years of flooding the market, the big producers that drive the U.S. market are sticking to plans to maintain relatively flat output, accumulate cash and keep natural-gas prices high enough for profits.

Third-party supply rates are backwardated or longer-term rates are lower than spot.  The pandemic effect and low inventories are the reasons for it.  A ‘normal’ market is when longer term rates are higher because of the added risk.   The bargains are with terms greater than 12 months that are almost $0.01/kWh lower. 

Having choices is a good thing…We are here to help!

Your friendly Neighborhood Energy.