Posted by Tom Dufraine on Nov 3, 2020 9:57:24 AM
They say all good things must come to an end, and that holds true even in natural gas markets. We experienced historic lows within natural gas markets from January through August 2020, in which NYMEX held between $1.50 and $1.90. The new norm took an aggressive 35% climb in only 2 short months and is holding between $2.70 and $2.90.
Below is a snapshot of the only times over the last 20 years that natural gas markets have held under $2.00 for any length of time, with the most recent hitting close to a 7-month span.
- 2001: NYMEX dropped below $2.00 for only 3 consecutive days beginning on September 24th
- 2002: NYMEX dropped below $2.00 for only 1 day on January 28th
- 2012: NYMEX dropped below $2.00 for 8 out of 10 business days between April 11th and April 24th
- 2016: NYMEX dropped below $2.00 for 46 out of 74 business days from February 11th through May 26th
- 2020: NYMEX dropped below $2.00 from January 17th to August 3rd
While no one likes to see upward pressure in markets, we knew that these all-time lows would not last. This was a result of an unseasonably warm winter on top of the economic shutdown due to COVID-19. In many ways the markets have normalized with economies opening and markets reacting to weather trends.
For the past 4 years, natural gas markets have consistently held between $2.50 and $3.00 with some winter peaks reaching upwards of $3.50. With colder temperatures rapidly approaching, we should see natural gas prompts holding around $3.00, with the likelihood that winter peaks will hit or exceed the $3.50 range.
Even with the current upward market pressure, we are entering into the winter months above the 5-year storage report, which leads us to believe that market trends will hold true through the spring of 2021. This may lead to additional buying opportunities for contracts up for renewal as far out as 2023. Now is still a great time to manage and reduce your future electricity and natural gas spend. Companies of all sizes are facing significant challenges; however current markets are providing a great opportunity to position yourself for future operations and profitability!
Topics: energy procurement