November 2015 Natural Gas Prices Report

Natural gas prices have a significant impact on electricity rates in Texas, each trading in a parallel pattern. As natural gas prices drop so do electricity rates because gas is the major commodity used in producing electricity. And it should be noted also deregulated electricity rates in Texas are the lowest in the nation.

Natural gas contract prices trade primarily based on the amount of gas in storage and the current weather patterns (supply & demand). Let’s review the numbers over the past three years –

November, 2012 – 3.969 Trillion Cubic Feet (TCF) record amount of gas in storage (4.0 TCF estimated maximum capacity). Electricity rates established new lows;

January, 2014 – The beginning of a brutally cold winter across the nation. Natural gas contract prices exceeded $6.50 for the current contract that month, and electricity rates rose significantly;

April, 2014 – Because of the brutally cold winter weather natural gas in storage fell to an 11-year low of 1.008 TCF.

The amount of natural gas going into storage then began to increase primarily due to fracking, resulting in a record 30 straight weeks of additions exceeding the 5-year average to the amount of gas going into storage, which was a new record.

In my Year-End Report last December, 2014, I predicted commodity prices would continue their steep price declines throughout 2015. At the time oil (WTI) prices had dropped from above $100 per barrel to $68.54. Natural gas prices had dropped from above $6.50 in January to $3.95 on the current contract.

In January, 2015, I predicted oil and gas prices would continue to reach new lows and stay low over the next two years. Specifically, I predicted natural gas would not trade above $3.25 at any time in 2015, and you would enjoy lower electricity rates in 2015.

As a recap – on April 27 natural gas traded at a three and a half low down to $2.42 on the current contract. Natural gas never did trade above $3.25 in 2015, as I had predicted, and hit an 11-year low on October 27 trading at an intraday low of only $1.948 for the November contract. And the most recent natural gas storage report indicated the amount of gas in storage had hit 4.0 TCF for the first time ever, approaching or meeting the maximum storage capacity.

What does all of this information mean for you?

The most significant fact listed above is the amount of natural gas in storage today is at the estimated maximum capacity. Add to this the prediction the nation will experience an El Nino weather pattern this winter which will generally produce higher temperatures across the country requiring less gas and electricity usage. I therefore do not see natural gas and electricity prices increasing significantly in 2016 unless the weather patterns change from the predicted warmer weather.

It is also projected solar energy prices will reach parity with utility prices in 36 states in 2016. Solar energy will continue to grow rapidly around the world as the price of installations continue to decline. Power Energy USA will now partner with McLaren Solar LLC to install solar arrays at commercial locations throughout the nation, especially in the Northeast.
Check the Power Energy website for additional information. Look for my January, 2016, report with my New Year energy predictions.
Doug Mathes
Power Energy USA