Energy News – December 2020
It’s no secret that oil and natural gas markets have been volatile over the last year. As we look at 2021 and beyond, there are a few things in play that could impact your budget.
Short Term: Winter is Here
According to the U.S. Energy Information Administration’s (EIA) weekly update released on December 10, 2020, shows demand for natural gas increased more than expected. Daily consumption was up nearly 10 percent from the prior week due to higher heating loads. Residential and commercial gas consumption drove a sizeable increase with a 21 percent growth from the previous week at 36.8 billion cubic feet per day.
Natural gas prices rose slightly with the increase in demand; however, the U.S. still has a large supply of natural gas in underground storage at 3.848 trillion cubic feet (Tcf), which is 8.7 percent higher than this time last year. With indications of a colder than normal winter, natural gas prices could increase throughout the winter heating season.
Long Term: Growth in Demand Could Impact Prices
Unlike crude oil, natural gas demand has been more consistent this year at 90-91 Bcf/d compared to 93-94 Bcf/d at the end of 2019. A lot of that demand is due to the utilization of natural gas for power generation. In fact, 45 percent of U.S. power generation is from natural gas.
Although demand has been consistent, production and investment in new supply have significantly decreased. The question remains, how much will this lack of investment impact prices by the end of 2021 when the U.S. Department of Energy predicts a full rebound of energy demand?
What should you do?
If you’re on either the Variable Rate or Guaranteed Savings Program, we recommend moving to a protection-based natural gas program to help safeguard you from the volatility in the market.
We offer two-protection based natural gas programs— Guaranteed Fixed Price and Price Protection. The Guaranteed Fixed Price Program locks in your price per therm for up to 60 months, giving you complete budget certainty. The Price Protection Program provides topside protection against natural gas rate spikes and downside participation during low-demand months.