Weekly Energy Report (02/10/2020)

Happy Monday Everyone –

The energy markets held on to their low price levels last week, with no month varying from the previous Friday’s close by more than 3 cents, and all of the annual term strips staying at price levels that are as low as any we have seen in several years.    Fundamentals are mixed for this week, however:

• Rig count is high and climbing, which suggests producers see higher prices coming.

• There is about 20 cents of price increase from the 12-month strip up to the 60-month strip – as this metric widens, it also suggests prices may be preparing to rise.

• Storage is holding in a good place between the 5-year max and the 5-year average, and is roughly 30% above storage levels from this week last year, putting downward pressure on prices.  

• Weather forecasts always impact prices in the short term, but how much and in which direction is open to question this week – the large population centers of the East Coast and Midwest are expecting warmer temps, but the areas West of the Rockies are all projected to be colder than normal.

With prices historically low, there just isn’t much room for them to go lower.   With the forward market showing uncertainty, we feel that the risk of waiting to execute isn’t justified, and we are advising our customers to execute their agreements and hedge any open positions as soon as practical.    We are also suggesting a serious evaluation of energy efficiency projects and on-site solar (with or without storage facilities) – ROI’s on projects are showing both strategies to be solid investments, especially in a rising future prices environment.     Please call your Lighthouse contact or reach out to me directly at 937-709-0098 x701 for help in getting your rates protected and exploring your project options.  

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