Thursday morning, the EIA reported a modest 57 Bcf withdrawal from storage inventories for the week ending March 4th. This was less than half of the 118 Bcf five-year average withdrawal, and less than one third of the 174 Bcf withdrawal seen last year for the corresponding week.
Natural gas inventories are now 2.479 Tcf vs 1.568 Tcf last year and the five year average of 1.752 Tcf
As we enter the 2016 storage injection season, expect to see more bullish EIA storage data as injections are expected to run measurable below the 2015 comps.
Although the storage surplus situation will continue, signs of reduced production should provide market support and the possibility of a hotter than average summer could very well trigger a much overdue rally.
Now is the time to formulate your company’s long term energy management strategy to hedge against unenviable utility rate inflation by taking advantage of extremely favorable market conditions.
At the wholesale level, energy commodity prices are currently at multi decade lows.
Fortunately the weakness in commodity prices has offset the sharp increases in the non-commodity components of utility rates which include transmission and capacity. Hence most properly managed utility budgets have been static to lower for the past several years.
The experts at NJGEC have been involved with managing and hedging energy market volatility for decades. We believe the historical drop in natural gas and crude oil is nearing the end for several fundamental reasons including increased demand in gas fired electric generation and sharp drops in productions. The state of the US oil and gas exploration and production industry has reached an inflection point where many producers are in a state of financial peril.
The impending reversal in energy commodity prices will have a compounded effect on utility rates as both commodity and non-commodity components will begin to rise in unison. For this reason, all businesses with energy intensive models should be positioning themselves to take full advantage of the historical low energy environment as a hedge against future inflation.
A properly managed energy procurement strategy should be proactively executed based on the market conditions, not contract expirations.
Whether under a long term contract or not, it is still possible to take advantage of this generational opportunity.
NJGEC has the expertise and ability to position your company to take full advantage of the current market conditions to implement long term hedges against inevitable future inflation.
It is our belief that a bottom could be made as early as the end of Q2, 2016. Our recommendation to our clients is to: BE PREPARED!
Call NJGEC today at 973-287-7797 to schedule a complimentary review of your company’s energy management plan.