The Kobiona Monitor

Volume 1 / Number 6
May 9, 2019

Kobiona’s leadership has enlisted the help of our Market Intelligence Desk to craft this monthly
publication to share major market dynamics impacting future power and gas prices. As every
client’s situation is unique, we encourage you to review market movements with us to decide
whether any action on your part could serve to lower your future costs or avoid known,
coming increases.

 

Weather
Over the next two weeks mild, seasonal temperatures should continue throughout much of the U.S. The classic “shoulder” season weather requiring little heating or cooling demand we witnessed throughout April is a reversal of the same month last year. April 2018 was one of the coldest Aprils on record and marked by several natural gas storage withdrawals (instead of injections), triggering the start of a natural gas storage deficit (to the 5 year average) that persists today.

 

 

 

Natural Gas
Natural gas is now the primary fuel source for power plants across the country and throughout New England. As gas prices often closely correlate to power futures, we monitor natural gas supply and demand fundamentals closely.

Prompt Month Prices
The NYMEX prompt month broke the $2.50 mark on April 23rd, hitting $2.46/MMBTU — a number we have not seen since June 2016 — and has hovered close to $2.50 since. Under $2.50 producers stop making money and we tend to see slowed production and a decrease in rig counts. We are in a “strong discount buy” window for both power and gas futures. Now through mid-May could easily be the best buying window of 2019 before cooling demand starts.

NYMEX Prompt Month 36 Month Lookback

NYMEX Prompt Month 3 Month Lookback
Dry Natural Gas Storage

Last week the EIA reported the first triple-digit injection of the season at a whopping 123 BCF, well above market consensus. The same week last year saw only a 50 BCF injection, the 5-year average 70 BCF. This large injection served to shrink the storage deficit to the 5 year average from 32% to 17.8%. Stocks now sit at 1,462 BFC, 9.6% above this time last year.

 


Will Maine Go Greener?
On April 30th, first-term Democratic Governor Janet Mills unveiled a new bill (LR 2478, introduced by Republican state senator David Woodsome, the primary sponsor) that would require the state of Maine to generate 80% of its electricity from renewable sources by 2030, and 100% by 2050. The bill also aims to reduce greenhouse gas emissions 45% below 1990 levels by 2030, and 80% by 2050. Former Governor Paul Lepage, a Rebublican, had put in place a wind energy moratorium in 2018.

Although Maine already sources about 75% of the electricity it consumes from renewable resources, the bill would put the state closer in line with other New England states with aggressive Renewable Portfolio Standard (RPS) mandates.

As this was a large focus of Gov. Mills’ election campaign, we have strong reason to believe this bill, in some form, will pass.



Questions?
For those tasked with procuring power and gas for the first time — or the tenth time — the industry can seem overwhelming with densely-technical and sometimes conflicting information.

We welcome your questions on how to apply our observations, as well as your feedback on The Kobiona Monitor. Please share how we can make this publication more useful by calling us on 844-209-7972, or contacting us via email, info@kobiona.com.