Energy News: Window of Opportunity During Spring Shoulder About to Close?

Energy News: 8 April 2014 Window of Opportunity During Spring Shoulder About to Close? Natural Gasis the largest source of

Energy News: 8 April 2014

Window of Opportunity During Spring Shoulder About to Close?

Natural Gasis the largest source of power for generation of Electricity; therefore, their pricing is highly correlated, which is why we focus on Natural Gas in our reports.

In our March 25th Energy Update we said with Natural Gas near its lowest prices since 2000, the conditions supporting a major bottom are in place, and although prices could go slightly lower in the near term, based on past history the average price of Natural Gas will likely be much higher long-term.

Energy News

Today’s report will explain why we believe the window of opportunity to secure rates near their lowest prices since 2000 is about to close.

In our Feb 19th Energy Update we pointed out, based on what has happened in the past, Natural Gas was not expected to remain near today’s very low prices for an extended period.

We came to that conclusion by reviewing data from the Energy Information Administration’s website, which revealed there were 2 similar instances in 2012 and 2016, when Natural Gas’s total supplies were higher during their Spring Shoulder periods than during this year’s Spring Shoulder period, and in both instances after declining below $2.00 per MMBtu, Natural Gas was much higher by the end of the year.

Energy News
Energy News

In 2012 and 2016, similar to this year, we experienced warmer than normal winters resulting in supplies reaching record levels during their Spring Shoulder periods, but by the end of the year prices more than doubled! 

Spring Shoulders take place between the winter heating and summer cooling seasons when demand for Natural Gas and Electricity are very low; therefore, it was not surprising the lows of the year in 2012 and 2016 below $2.00 per MMBtu, were reached during their Spring Shoulder periods and prices moved higher throughout the rest of the year.

Therefore, with Natural Gas presently trading below $2.00 per MMBtu and our supplies lower than in 2012 and 2016, where do you think prices will be at the end of this year?

Energy News

Anyone who hesitated to lock in the low rates during the Spring Shoulder periods in 2012 and 2016, PAID DEARLY by the end of the year. Hopefully if you have not already locked in today’s low rates during this year’s Spring Shoulder period you will not repeat the mistake of those who hesitated in 2012 and 2016.

The window of opportunity to secure rates at their lowest prices of the year will likely close soon; therefore, if your present energy agreements expire in 2024 or 2025, we recommend taking advantage of this year’s historically extremely low prices, and reserve energy to be available when your present agreements expire.

We believe the empirical evidence presented in today’s report strongly suggests the average price will be higher long-term, and the upside risk is much greater than the downside potential of waiting hoping for slightly lower prices.

Not every client’s risk tolerance and hedging strategy are the same, but hopefully, today’s report will help put into perspective your risk/reward opportunities. We invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Energy Professionals
Senior Commodity Analyst

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