Infinity Insights – Volume 9, Issue 31
AT-A-GLANCE SUMMARY
Prior to the Labor Day weekend, NYMEX natural gas prices in the front of the curve was best characterized as a market waiting for direction.
SUMMARY OF THE LAST WEEK IN CHARTS
Spot month natural gas (October) has support at 2.35, with resistance at 2.50. Calendar year 2020 has support at 2.38 with resistance 2.50. Calendar year 2021 has support at 2.40 with resistance at 2.54.For a look at our monthly market reports, visit Infinity Power Partner’s Market Overview.
RoadmapNYMEX natural gas spot month (October) moved higher, closing at 2.496, up $0.34
compared to the close of August 23rd.
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 finished up by ≈$0.01425 at $2.51.
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 closed at $2.47, better by ≈$0.0525.
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
Prior to the Labor Day weekend, NYMEX natural gas prices in the front of the curve was best characterized as a market waiting for direction. Following a retest of the support at $2.10, prices began rising. Temperatures were hot and demand for capacity up front evident.For the month of August, ERCOT real time (LMP) power prices moved $5 higher in Cal 2020 and slightly lower for Cal 2025. The middle of August witnessed extreme LMP prices as heat drove demand. While the impact for pricing is just being revealed, it looks very similar to the horror story of August 2011. Note the chart, belowReal Time pricing (LMP) is under fixed pricing almost all the time. When we have spikes like now, time will average down the damage. Anomalies are troublesome. Experience tells us that, past summer, prices return to “normal”. Note that exceptions to this occur with severe winter and unexpected loss of generation assets. However, in today’s circumstances, there’s one more month to summer: September. Do you stay on LMP, thinking that averaging down the damage over time is the answer; OR, do you lock fixed, avoiding another possible spike in September? There are folks on both sides of this issue.Conservatively, you lock; aggressively, you continue to float. At today’s curve, it’s a closer call with sub-$0.05 fixed power then we had in 2011 at much higher numbers. Regardless, we remain a proponent of loads with sufficient sophistication to float on LMP. Risk is manageable given opportunity for reward. Spikes have to be expected occasionally and unexpectedly.