The Kobiona Monitor

Volume 2 / Number 7
August 25, 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.

The Heat is On 
If summer ended today, it would stand as the 4th hottest on record (since 1950) for the U.S. Above-average temperatures are forecasted to continue into October for much of the country, keeping cooling demand (air conditioning) high late into the year. The persistent heat has absorbed a lot of excess natural gas supply for “power burn” — running gas-fired power plants — as well as lifted both gas and power future commodity prices off their historic lows of earlier this year.

 


Impact on Natural Gas Prices 

After spending much of 2020 under $2/MMBTU, natural gas spot prices broke through that ceiling on August 3rd with the September contract opening at $2.10. As of market close on Friday, August 21st, spot September gas had run up to $2.44/MMBTU.

 

 

 

Impact on Future Power Prices
Future power prices have lifted off their historic lows of late March, the most dramatic impact hitting 2021 prices (for all regions). Around the country, to date, prices have increased the most in MISO, Northern IL, TX (ERCOT North), and CA (CAISO).
Source: Constellation/Exelon

 

Storage Inventories Now 15% Above the Five Year Average. Above Five Year Range 
The EIA’s August 14th report showed the U.S. holding natural gas inventories of 3,375 BCF, 442 BCF (15%) above the 5-year average of 2,933. This week, stocks moved ABOVE the 5-year range (gray shaded area) and are 15% above the 5-year average (gray line). This extremely bearish fundamental is the key factor keeping prices from rallying further given increased demand and heat.

 

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.