Energy Market Update: February 2025 Recap

The cold continued into February with the season ending as the coldest winter since 2013-2014.  Day ahead and real time prices did not hit the extremes seen in January, but did crest over $200 on multiple occasions.  Forward terms have started to move up. The 12-month electricity price at the start of the month was ~$45.85/MWh in Ohio and was $49.20/MWh by the end of the month.  In PA, it increased from ~$49.81/MWh to $53.80. Looking at longer terms, the 36-month strip in OH rose $0.55 to end the month at $47.09.  PA was similar with a $0.53 rise to end at $52.18. As we continue to get closer to the start of higher capacity prices on 6/1/2025, end users will see their prices rise as more of those high-priced months are considered in their quotes.

The end of February saw an extreme rise in volatility.  Although the bitter cold is behind us for the season, with natural gas storage getting tight, any indication of cold spring will bring an outsized market reaction. We continue to see market fundamentals that are worrisome for energy buyers: 

• The number of US gas drilling rigs is about 14% lower than this time last year.
• Natural Gas storage injection levels are currently 238 BCF below the 5-year average. A sharp contrast to the surplus we had going into the winter.
• PJM continues to face issues related to its capacity market structure and as a result of cases brought against them, have moved the 26/27 auction to next July.  There are initial indications that PJM has agreed to a minimum and maximum rate for the 26/27 and 27/28 auctions that would at least give a more limited range of potential prices.  This change has been submitted by PJM but still will need FERC approval.

The wholesale energy markets watch these factors, and changes can push prices up or down on a daily basis.   Based on where we stand now, we recommend evaluating these strategies:

• We recommend locking in your energy price through at least the next 12 months as soon as practical.  With the forward curve flattening, longer terms are becoming more attractive.
• Consider a capacity and or transmission passthrough structure.  These contracts avoid the premium that suppliers typically add to account for unknown rates and customer attributes.
• Invest in a plan to reduce your peak demand and overall energy consumption, if you haven’t already.  With the looming rise in capacity prices, lowering your associated PLC tag could have substantial price benefits for the following year.

Your to-do list for March and the heading into summer:

• Make sure you have a good relationship with a trusted energy advisor – you will want to have someone with experience and expertise watching the markets for you.
• As you budget for 2025 and beyond, expect prices to be higher than you are paying now.  Watch for changes in weather forecasts as a cold spring or hot start to summer will push prices higher.

Want to help your business navigate the current market? Get started with your Shipley Energy Advisor today!

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Natural Gas Market Update

The below freezing temperatures witnessed between January and February caused “freeze-offs” in which production volumes were temporarily curtailed. This caused higher than expected withdrawals from storage. Natural gas storage numbers continue to decrease with the colder-than-anticipated weather trends.

The cold weather and impacts to storage lifted prices, and the March 2025 NYMEX natural gas contract expired at a price of $3.906/MMBtu.  

Multiple utility companies across the board in Pennsylvania and Ohio are increasing their prices-to-compare. These utility companies include, but are not limited to, UGI Utilities, Duke, People’s Natural Gas, and Columbia Gas of Ohio.  

Heat demand in the United States and Europe has increased, while global wind speeds have decreased causing less renewable output. More use of natural gas is needed to make up the difference. More on this can be found here: Why Natural Gas Prices Are Surging: Weather, Supply And Global Demand.

Factors impacting the natural gas markets currently:

• Pulling gas out of storage due to weather (Bullish). There is recent weather consensus that we may have a cold pattern returning at the end of March. This could impact the beginning of storage injection season in April.
• Recent volatility has been attributed to uncertainties regarding tariffs on imported natural gas, specifically from Canada. Currently, the tariff rate on energy imported from Canada is slated at 10%. It is important to note that in February, the United States imported less than 6% of its average daily demand from Canada.

Action Advice: Due to the volatility, we recommend checking in frequently with your account manager for daily changes to the market and opportunities to lock in during sell-offs.

Other rate options include Basis Only or NYMEX Lock deals to separate the two elements of your natural gas supply price to look for potential value vs standard Fixed pricing. Ask your Account Manager for details. 

March 2025 Natural Gas NYMEX Settlement Price: $3.906/MMBtu

Last month: February 2025 Natural Gas NYMEX Settlement Price: $3.535/MMBtu

Last year: March 2024 Natural Gas NYMEX Settlement Price: $1.615/MMBtu

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Petroleum & Refined Products

February continues the uptrend in U.S. ISM manufacturing expansion, which correlates with increasing distillate demand via industrial and trucking activity. Beyond the recent tariff headlines, which would indicate the economy could be heading for a slowdown along with lower interest rates, January 2025 marked the first expansion in ISM Manufacturing (50.9) since 2022. February showed another expansion which could indicate the economy may be recovering.

Overall crude and refined products prices have trended lower notwithstanding the recent price rallies due to the on-again, off-again 10% on energy tariffs, namely between Canada and Mexico. OPEC did announce they plan to move forward with their April 2.2 million barrel-per-day production hike target total. The initial production increase would be roughly ~150K bbls per day to start. Upon this announcement, energy prices sold off.  Some believe the price reaction may have caused OPEC to walk back this news and delay the start.

ULSD HO futures have remained steeply backwardated through the winter, indicating strong demand driven by the seasonally colder temperatures, strong U.S. exports and unplanned refinery outages and maintenance. This is a demand structure we have not seen in the last couple of years dating back to the height of the Russia/Ukraine war supply shocks.

Gasoline demand for January and February has remained consistent.  Recent surveys have indicated that March gasoline demand is set to rally slightly above the seasonal norms of the last 7 years. The 20cpg recent selloff in Apr futures should eventually find its way to pump, although prices at the street level have maintained an average of roughly $3.25-3.50 per gallon. We are expecting a rebound in gasoline demand this spring into summer. Near-term lower prices should certainly help drivers.

As for the broader markets, equity markets have reversed lower after all-time highs set on 2/19/25. Institutional selling has sunk its teeth into prices, as all major averages have lost key moving average support. The indiscriminate selling has not spared the petroleum market either as a broader risk off theme continues to ensue.

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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.