ENERGY
MARKETS
***Updated 1st of the month each month***
*Note:
Tritium is a retail power & natural gas broker & energy commodities analyst. Note that in the majority of electric markets that we serve natural gas makes up the lion’s share of electric generation; as well as nat gas is the most volatile of the big 3 primary energy sources for electric generation; nuclear, coal, gas. Therefor to track and trend electricity markets we need not look further than natural gas itself. Two birds, one stone.
Natural Gas: Settlements
There used to be an adage that energy got more expensive over time. That was before the shale and horizontal drilling revolution. After nearly 10 years of volatility from 2000 - 2009 the abundance of domestic oil & gas was unlocked unleashing a glut of supply for the North American market. Note the linear regression average price (red line) and how that trend has served as a strong indicator of price direction. After great uncertainty during the start of the Russia Ukraine war markets have plummeted below pre-conflict levels, this holds a lot of weight to a good energy commodities analyst; “Low prices are here to stay, lock-in the dips when presented with the opportunity.”
Natural Gas: Futures
Here we see the Henry Hub Natural Gas Futures curve, or in other words what prices are at different times in the futures. An upward sloping curve, higher prices expected, is called contango. A downward sloping curve, or lower prices expected in the future, is called backwardation. Here we see a contango futures curve, however while prices are higher in the future the delta between today’s price and 60 months is not at a large premium, in other words there is not a lot of uncertainty of future price. This tells us the market knows and discounts uncertainty because there is so much supply, that if prices were to spike they would regress, or revert back to near their prevailing levels.
Natural Gas: Technicals
Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities in price trends and patterns seen on charts.
The horizontal lines in the graph on the left indicate important levels of price action; highs, lows, consolidations. Prevailing prices are $2.746/Mcf and the upper level, or resistance, $3.102/Mcf, and lower level, or support, at $2.511.
Both resistance and support levels can be flipped into support and resistance once price action determines. We anticipate price action to continue in this $2.00 - $3.00/Mcf range through 2023 and no fundamental analysis indicate that a bullish trend has been established with exception of anticipated winter and LNG exports headed to Europe.
ERCOT; South, North, Houston
Along with analyzing natural gas we can view ERCOT monthly settlements for MegaWatt hours (MWh) at the NYMEX. When taking any given time period i.e. 12 months, and totaling the respective monthly settlements and dividing by the term arrive at the wholesale energy price for our given term. This allows us as energy consultants transparency where the markets are now and how they relate to the Retail Electric Providers’ (REPs) prices.
