Infinity Insights – Volume 9, Issue 14
AT-A-GLANCE SUMMARY
Natural gas is plentiful. When sufficient infrastructure is created to move product from where it’s produced to where it’s needed, the full impact of supply change will be realized.
SUMMARY OF THE LAST WEEK IN CHARTS
Spot month natural gas (May) has support at 2.65 then 2.50 with resistance at 2.90. Calendar year 2020 has support at 2.72 with resistance 2.78. Calendar year 2021 has support at 2.62 with resistance at 2.67.For a look at our monthly market reports, visit Infinity Power Partner’s Market Overview.
RoadmapNYMEX natural gas spot month (May) finished $0.004 down at $2.66.
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What’s This? – The “Roadmap” is the price action chart depicting the NYMEX natural gas spot month. It’s important because it is essentially the trading community’s market sentiment.
Cal 20Calendar 2020 closed≈$0.015 higher at $2.77.
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What’s This? – “Cal 20” is the first complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.
Cal 21Calendar 2021 settled ≈$0.0075 higher at $2.68.
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What’s This? – “Cal 21” is the second complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.
OUR TAKE ON THE MARKET
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Natural gas is plentiful. When sufficient infrastructure is created to move product from where it’s produced to where it’s needed, the full impact of supply change will be realized. More exports, LNG, petrochemical, generation, to name the major uses, will be forthcoming. The once tight supplied commodity with notable price sensitivity is giving way to a low priced feedstock with diminished volatility. This appears to be the new normal.By multiplying the feedstock with the cost of generation (heat rates), we define wholesale power price. Note that prices are firm up front (Cal 2020, 2021) yet weak in the back of the curve (Cal 2023, 2024, 2025). Why?Our view: The answer lies, at least in part, in the transitioning from grid-supplied power to onsite generation, renewables, storage, and the arbitrage between them. This transition is pictured in the two charts, below.The first chart is the forward curve of NYMEX natural gas, 2020 – 2025, for June 24, 2015 and the same curve as of March 29, 2019. Note that the curve is flatter in 2019 and about $1/MMBTU cheaper.The second chart is the same 6 year comparison, but this time comparing ERCOT 7X24 wholesale power for the north zone. Note here that the 2015 curve is flat and 2019 is sharply higher during the summer months but lower otherwise. Also note the lower peaks as you move out in time.How low can price go? No one knows for certain, but all indications point to lower numbers.