The Kobiona Monitor

Volume 2 / Number 3
March 5, 2020

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.

Market Overview
One of our suppliers did some interesting math: In this century thus far there have been 5050 business days. Of those, natural gas has traded below $2/MMBTU on only 80 of those 5050 days. That means in 20 years, gas — which largely sets power prices – has only been this cheap 1.58% of the time. To hold out on securing future gas and power contracts, you’d have to be 100% certain gas and power futures will fall to lower than they have ever been in history.

Below are some additional details on the bearish market we continue to enjoy, for the time being.


Prompt Month Prices

NYMEX prompt month (March) closed on Wednesday, February 26th at $1.82/MMBTU, down from $2.86 the same day one year ago. Gas has traded below $2 since January 17th, 2020 – 34 business days. The last time gas was below $2 was in early 2016.

NYMEX Prompt One Year Lookback

NYMEX Prompt Five Year Lookback

Source: Nasdaq


Dry Natural Gas Storage

Natural gas storage inventories continue to hover right around 10% above the 5 year average. According to the EIA, the U.S. is sitting on natural gas inventories of 2,343 BCF as of February 14th. That’s 631 BCF (35.4%) above levels one year ago, and 200 BCF above the 5-year average of 2,143.

 

Near-Term Weather
Concentrations of cold will linger in the West and Southeast into the first week in March, then much of the East turns to above-normal temperatures through the 9th.

As of this writing, Winter 19/20 currently stands as the 4th warmest winter in recorded history (since 1950). At the end of March – next issue – we’ll know where it finishes.

 

 

Contracts Forward Capacity Prices for New England Clear at All-Time Lows
Capacity accounts for roughly 25-35% of your all-in supply rate. Future capacity prices are set for New England every February for three years out. This year’s auction (FCA 14) held in early February for Capacity Year (CY) 23/24 — June 1, 2023 – May 31, 2024 — came in well below market estimates and set new historic lows for the region, $2/kw-month, down from $3.80/kw-month the Capacity Year prior.

Supply contracts signed now that fully fix capacity and terminate after May 31, 2024 will spread the benefit of these historically low future capacity rates across the entire term.

Source: Constellation Energy

Additionally, the 2019 New England System Peak Hour – which determines your individual capacity obligation – was finalized by ISO New England. The 2019 system peak was July 30th, between 5 and 6 pm.

Source: ISO New England 

 

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.