As summer temperatures began to rise, so did natural gas futures. Starting in late April, the NYMEX saw a steady increase, prompting many to prepare for a summer heat-fueled price surge. However, a break above the crucial $3/mmbtu mark lasted for just four trading sessions before prices plummeted. What happened?
Recall that in February, when gas prices hit their lowest point, the main issue was overproduction. Following a very warm winter and high levels of supply, natural gas producers began cutting production to decrease supply and drive prices up. However, asking a producer not to produce is like asking a fish not to swim; it's their nature.
The recent price dip can largely be attributed to producers. Starting in mid-May, producers began increasing their previously reduced production levels back to February numbers, with some even exceeding those levels. These increases, combined with the new MVP pipeline that became operational in mid-June, have boosted production levels, increased supply, and consequently cooled down rising natural gas prices.
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Moreover, the most recent hurricane, Beryl, not only left 2-3 million people without power in Texas but also shut down the crucial Freeport LNG plant, trapping significant amounts of natural gas domestically and further increasing supply.
Gas prices have a notable impact on electricity pricing. During this period, the forward curve of PJM also reversed direction and began to decline. The fear of AI and data center growth that drove a rise in prices in April has dissipated, presenting a great opportunity for customers to lock in favorable rates amidst positive gas news and the reversal of this narrative-driven fear.
In summary, the past few months demonstrate that market narratives can change quickly, affecting prices. Commodity prices are a game of expectation versus reality; when the two don't align, prices react. Partnering with a company like Energy CX helps customers establish best buying practices to capitalize on moments like these.
At Energy CX, we are a group of consultants who think like traders in a marketplace full of brokers who think like salespeople.
Contact us today to learn how we can help you navigate the complex energy market and secure the best rates for your business.
