The Shipley Energy Commercial Solutions Team is excited to share the June Energy Market Update to inform you of trends, weather, and other factors impacting the energy market. Read the May 2024 energy market update here.
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The July 2024 NYMEX Natural Gas contract expired for $2.628/MMBtu. This is the second straight month that the NG NYMEX settlement has been above $2.00, following the June settlement at $2.493. From March to May 2024, the NYMEX settled at $1.615 or lower for three consecutive months. Before expiring, the July 24 contract traded as high as $3.159 before settling back down to the expiration level of $2.628. The prompt 12 months of the NYMEX have trended steadily lower over the past several weeks based on lower demand for gas and well above-average gas levels in winter storage.
A major factor to watch over the coming months will be the severity of hurricane season and the potential impact on the Southern U.S. Major oil and natural gas production and distribution facilities are located throughout Texas and Louisiana and are vulnerable to major storms making their way into the Gulf of Mexico. This hurricane season has started earlier than usual, with Hurricane Beryl making its way through the Atlantic at the level of Category 4. Based on tracking of prior years, this is the earliest that there has been a Category 4 or greater hurricane in the Atlantic and the only such occurrence ever recorded in the month of June. Meteorologists have noted higher ocean temperatures as a contributing factor leading to earlier and more severe major storms.
Levels of available natural gas in underground storage remain well above average for this point in the year. As of last week’s report, the U.S Energy Information Administration is showing levels of gas in storage that are 11.3% above last year at this time and 20.6% above the average of the past 5 years. The level of gas available in storage by the time we reach the month of October will impact how much concern the market has regarding available winter gas supply.
Factors impacting the natural gas markets currently:
Action Advice:
July 2024 Natural Gas NYMEX Settlement Price: $2.628/MMBtu
Last month: June 2024 Natural Gas NYMEX Settlement Price: $2.493/MMBtu
Last year: July 2023 Natural Gas NYMEX Settlement Price: $2.603/MMBtu
Electricity prices in June continue to be attractive for 2024 and 2025, with the 12-month price trading ~$2.60/MWH below the 36-month price in Ohio and ~$3.70/MWH below the 36-month price in PA. Those 12-month prices on the last Friday in June were $0.05 to $0.30 below prices on the last Friday in May. (Remember that this report refers to energy-only rates and does not include other all-in fixed retail price components.)
The underlying market fundamentals suggest that prices may rise in the near future. Remembering that natural gas is a primary feedstock for electricity generation and a major source of volatility in electricity prices, you see worrisome news:
The wholesale markets are watching these factors, and recent intra-day price moves indicate a market ready to run prices up at the first sign of bad news. To avoid this kind of price spike and its aftereffects, which could leave prices high for an extended period of time, we recommend locking in a price for 2024 and 2025 as soon as practical.
As always, the cheapest kilowatt hour is the one you don’t use, and higher prices mean that energy efficiency and on-site renewable generation projects make that much more financial sense. Also, using less power and creating your power work to counterbalance the market forces pushing prices up and make ecological sense, too.
Your to-do list for July:
Energy prices bottomed in June after a 3-month selloff route. June 4th marked the bottom for prices this year, with refined products trading down to the lows in 2023 almost today. All three contracts, NYMEX WTI crude, ULSD, and RBOB, essentially recovered in a straight lineup as bullish technical and fundamentals aligned. The reported June data for refined product demand recovered from an overall lackluster driving season later in the month. Welcoming news to diesel is that U.S. trucking freight tonnage activity rose for a second straight month, +3% month over month and slightly year over year. The overall U.S. economy continues to slow, showing up in lower inflation data. Fundamentally, a slowing economy would translate to bearish demand. Still, falling inflation is boosting risk asset prices as it directly correlates to the Federal Reserve cutting interest rates soon, which is considered a bullish near-term factor.
Cash markets—As the ULSD contango carry structure continued to steepen in June, the NY Harbor basis weakened to its lowest levels in years at month-end expiration, having since corrected and bounced back as for non-road heating oil, the basis has continued to sell off as the Renewable Volume Obligation (RVO) sustained its rally with the cost of on-road transportation fuels compliance—renewable identification numbers (RINs).
The look ahead: Banner demand for air travel for the 4th of July has initially been reported, while gasoline demand for vehicle travel has yet to be reported. However, AAA expects a record of 60.6 million people to hit the road, +3 million over last year. Hurricane season starts to come into full swing, and the expectation is that this year will be very active. So far, that prediction has come to fruition, with Beryl strengthening as much as a category five before weakening into a category one at landfall in Texas. As a reminder, roughly half of the country’s refining capacity sits near the Texas Gulf Coast, and hurricanes can significantly threaten and knock supply offline, causing volatile price swings.
Action advice: The winter heat NYMEX strip is trading again in backwardation, which could be expected with the monthly long June rally. $2.57 – 2.60 will be a pivot point for NYMEX HO. If crude oil continues to its series of supply draws, we could expect the whole energy complex to lift with it. The rally has cooled somewhat with slight selling pressure as the market will take its next cues from EIA data and the Fed.
Please speak with your Shipley Energy Fuels Advisor to help your business navigate the current market.
Disclaimer: The market update is intended solely for informational purposes only. Shipley Energy Company does not warrant or attest to its accuracy. All actions and judgments taken in response to this report are the recipient’s sole responsibility. Shipley Energy Company shall not be liable for any direct, indirect, incidental, consequential, special, or exemplary damages or lost profit resulting from these market updates.
