News And Insights From SJI Energy Advisors

Use these resources to help your business gain control of its energy needs.

Locking Up Future Savings and Budget Certainty

Posted by SJI Energy Advisors on Jul 4, 2020 3:58:00 PM

How often are you able to secure future savings while locking in operating costs for goods and services needed to run your day-to-day operations? You probably would answer “Seldom, if ever.” If you could achieve guaranteed savings and budget certainty through 2020 or beyond, would you do so?

Our clients are taking advantage of this historic buying opportunity, contracting now for flow dates beginning late 2020 and into 2021.

Electricity At 5-Year Lows – Strong Buy

It is our firm belief that electricity prices are at or near the cost floor, and the upside risk is significantly greater. Now is the time to lock up these extraordinary prices through 2020 and beyond.

Natural Gas – Buy

With the exception of the oversupply dip in 2016, natural gas is close to a 5-year low, and we feel strongly that the downside opportunity is small compared to the significant upside risk. Late summer is historically one of the best times to buy natural gas, and we are advising our clients to extend their current contracts through 2020.

Bear Drivers: Factors Driving the Market Down

Short Term:

  • Weather plays a significant roll in short term energy prices. There has been some hot temps but overall this summer has been relatively mild especially throughout the Northeast

Long Term

  • Strong growth from shale gas is expected to continue
  • Possible oil and gas drilling in federally-owned offshore locations
  • New pipelines approved
  • Competitive cost reduction in the nuclear sector

Bull Drivers: Factors Driving the Market Up

Short Term:

  • Smaller than expected injection into natural gas storage
  • Supply of natural gas has been flat week after week
  • The consumption of natural gas for retail and generation continues to increase

Long Term:

  • Pipeline projects continue to suffer delays
  • New LNG export facilities expected to come online in 2021/2022
  • Significant increases in LNG for exportation
  • US is projected to being a net energy exporter
  • Year over year growth in natural gas generation