What do COVD and a warm winter have in common?
Answer: They both wreak havoc on natural gas prices.
Aaron Lovenworth, Regional Sales Manager at UGI Energy Services put some information together to help you better understand where natural gas prices are headed, and what you can expect in the upcoming winter season.
- Before the pandemic began this year, we’d had a very mild winter. So there was already an abundance of natural gas supply going into the spring of 2020. But production levels did not immediately decrease, leading to a massive over-supply in the market. This depressed natural gas prices to the lowest levels we have seen in many years. These market conditions are known as volume-over-value.
- The volume-over-value strategy did not work out very well for some energy producers, causing a change in the way our industry is operating. Instead of volume-over-value, we now seeing a value-over-volume mindset. This means that producers have decreased natural gas production to come more in line with current demand.
- These value-over-volume market conditions are impacting current natural gas prices because rig counts, and, subsequently, production have now decreased. Natural gas prices, traded on the NYMEX exchange, have increased by nearly $0.70/Dth over the 12 month-forward curve since this change in strategy.
The weather will surely play an important factor in where energy prices go this coming year. UGI Energy Services is here to help you understand how this may affect your business.
- Is now an ideal time for your company to lock in a fixed price?
- Does it make more sense to wait it out?
- Or is some combination of these strategies right for your business?