The Kobiona Monitor
Volume 1 / Number 9
August 15, 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,
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
NYMEX prompt month (September) is trading at a 3-year low, $2.14/MMBTU on August 14th. Forecasted heat for the second half of August and into early September could easily lift prices up again from these lows, similar to the rapid run-up we witnessed in the first few days of July.
NYMEX Prompt Three Year Lookback
Dry Natural Gas Storage
On August 8th, the EIA reported inventories of 2,689 BCF through August 2nd. This brings stocks to 343 BCF above levels this week last year, and lifts reserves to only 4% below the five-year average of 2,800 BCF. Inventories have been in a deficit to the five-year average since the Fall of 2017, as much as 33% below the 5-year average last November. A quick glance at the vertical dotted lines below show how much better of a position inventories are in compared to one year ago, now well within the five year range and very close to the 5-year average. The market continues to reward this improved picture with “value buys” in both gas and power throughout the U.S.
Natural Gas Production
For the week ending August 7th, dry natural gas production hit a record high of 91.4/BCF a day, up from 88.4 BCF/d in mid-July. Gas production remains robust despite spot prices trading to close to all-time lows.
Above-normal temperatures and humidity are expected for much of the U.S. for the balance of this month. This could put upward price pressure on commodity prices, especially power.
New England Preliminary System Peak Set on July 30th from 5 to 6 pm
Reminder: The New England Region (“ISO-NE”) sets a system peak one hour each year, the single hour during which the entire region was using the most power. This determines the capacity tag, and therefore individual capacity obligation (cost), for each electrical user for the following capacity year (June 1, 2020 – May 31, 2021). For those who pass through capacity, the capacity tag they set that hour is the largest determinant of their next year’s capacity costs. For those who fix capacity, this value influences the pricing for the term after their current contract.
ISO New England hit a system peak for 2019 on July 30th on Hour Ending 18 (from 5 to 6 pm) at 23,972 MW.
If you would like a “Capacity Refresher” to better understand the consequences of this system peak on your electricity spend, we’d be glad to schedule a time.
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, email@example.com.