ARTICLE
Electric: Power burn/consumption from natural gas set an all-time high in the month of June, spurring some price volatility to the high side in the wholesale market. The early summer heat has forced residents and commercial businesses to run their air conditioning units at a rapid and consistent rate. On-peak wholesale power prices for the remainder of calendar year 2016 have risen roughly 7% over the past month. Similarly, future year on-peak pricing (2017-2020) has increased in the 1-3% range as well. Gas: The July 2016 contract expired at $2.92, a 49% increase over the June 2016 settlement of $1.96. Repeatedly smaller than (five year) average injections have left traders wondering whether or not max storage will be reached at the end of the refill season. As spot month pricing approaches $3/MMBtu, more and more end users might decide to switch back to coal-fired generation, which may incentivize supplemental natural gas drilling activity and in turn entice producers to create new wells. It’s also important not to forget that while this summer has been warmer than normal, this wasn’t completely unexpected as the La Niña weather phenomenon calls for hot summer temperatures as well as subsequent above average fall and winter warmth. Relatively hot winter temperatures, as we saw this past year, can lead to a steadily declining market – Which traders and market movers won’t be able to ignore as a distinct possibility in the coming months.