Infinity Insights - Volume 11, Issue 38

AT-A-GLANCE SUMMARY

The pause in price advances begun by Putin’s European natural gas statement of satisfying needs is still with us.

SUMMARY OF THE LAST WEEK IN CHARTS

Spot month natural gas (November) support is 5.20 with resistance at 6.00. Calendar year 2022 finds support at 4.30 with resistance at 4.75. Calendar year 2023 has support at 3.40 with resistance at 3.75.

Roadmap
NYMEX natural gas spot month (November) finished $0.155 down at $5.41 compared to last Friday’s Close.

Calendar 2022
Calendar 2022 settled ≈$0.095 up at $4.475.

Cal 2023
Calendar 2023 ended ≈$0.115 higher at $3.615.

OUR TAKE ON THE MARKET

THE "WIDOW MAKER"

Volatility…

NYMEX Natural Gas

The pause in price advances began by Putin’s European natural gas statement of satisfying needs is still with us. Despite lack of weather demand, prices firmed back to near $6 in spot month, then pulled back. More germane to procurement, the back calendar strips continue strong. In the recent past, sideways action saw prices between $2.50 (good value) and $3.00 (pricey). Currently, all are priced above $3.00 with dramatic movement:

We hear from some that hope for pullbacks to catch the train they’ve missed. No one wants to pay up only to see a sell-off, so many conclude a sell-off is in the works. Wishing won’t make it so and time is not on your side (we haven’t seen winter yet). It’s no longer realistic to look for savings but rather the avoidance of higher prices that seem likely to come.

WHOLESALE POWER

ERCOT

Recent comments concerning real-time pricing (LMP) often center on the amazement of how high averages are. The current October average is in the mid $50s, up from the $20s of late last year. Aberration? Not really. Remembering that the closest correlation we’ve found is spot natural gas (5.85) and the financial spot month heat rate (10.81 – RTC). That math sees a $63+ price.
 
We have long held that LMP will “normally” offer a 10% to 20% advantage. This appears true even after the fireworks from the Valentine's Day’s freeze. The fact that seems elusive, however, is LMP prices will trail (but directionally follow) generation at the margin values, ergo higher begets higher. Floating, even if you’re suitable, is a questionable strategy.

PJM

Prices follow natural gas.