...EMEX believes these bullish factors for the natural gas and power markets outweigh the bearish trends in terms of natural gas production...
Houston, TX (PRWEB) October 24, 2014
EMEX, LLC a leading consulting and energy risk management firm powered by expertise and the latest technology, announces its forward energy outlook for the balance of 2014 and Calendar Year 2015. EMEX forecasts that natural gas prices are likely to remain range bound for the next 14 months while power prices, especially in PJM and the New England ISO, are likely to increase.
Given this outlook, EMEX is urging consumers to look at locking in longer term contracts for both natural gas and electricity before the end of the year to secure their energy needs through Calendar Year 2015.
“While natural gas production has resulted in an unprecedented recovery in natural gas in storage, we are still likely to end the injection season at the lowest levels since 2008,” explained Phillip T. Golden, Director of Risk and Product Management at EMEX. “With an increasing number of weather forecasts calling for another colder-than-normal winter, lower storage levels, and coal plant retirements in 2015, EMEX believes these bullish factors for the natural gas and power markets outweigh the bearish trends in terms of natural gas production and the possibility of an economic slowdown.”
Natural Gas Outlook
EMEX is calling for natural gas prices to close out 2014 at an average cost of $4.38/MMBtu, an increase of 20% compared to last year and 16% above the average calendar year price for the past 5 years. EMEX maintains its guidance for Q4 2014 of between $3.75-$4.10/MMBtu, which a bias toward the low end of that range.
For Calendar Year 2015, EMEX forecasts gas to trade in the $3.70-$4.10 range, with the biggest determinant being this coming winter. An increasing number of forecasts are calling for below normal temperatures and above average snowfall compared to historical averages. If these prognostications are correct, given the lower storage numbers, natural gas could exceed the levels seen in early 2014 and stay there. In addition, the recent collapse in oil prices could soften bearish supply numbers for natural gas given that a significant percentage of natural gas production is affiliated with oil production. A sustained slump in oil prices, while generally positive for consumers could actually provide support to the natural gas market if supply falls off.
Power Market Outlook
Each major competitive power market will face some unique challenges during the remainder of 2014 and 2015. These challenges are laid out in additional detail below. Given these issues, EMEX recommends that clients look at longer term contracts as well as potentially different product structures to put end users in the optimal position to manage their energy risk costs going forward.
- ISO NE. ISO-NE is likely to remain constrained in terms of natural gas supply, a serious concern for an area with an increasing reliance on natural gas fired generation. For clients in ISO-NE, the costs associated with the Winter Reliability Surcharge remain a concern and could be as large or more than last year depending on weather. In addition, the retirement of over 2.5 million MWH in annual generation could put upward pressure on power prices. Finally, regulatory uncertainly, both in the form of the future status of the Winter Reliability Surcharge and how the Massachusetts DPU will address cost recovery for the utilities create an uncertain market and could lead to higher prices.
- PJM. Significant coal plant retirements are expected to impact PJM starting in 2015. By the end of the decade, it is anticipated that PJM could lose upwards of 15% of its total installed capacity, putting upward pressure on prices. Regulatory uncertainty around PJM’s Capacity Performance Product as well as the future treatment of demand response in the PJM markets is also likely to add upward pressure on prices. Finally, recent moves by the incumbent utilities in Ohio to move some of their generation units back into a “rate base” style pricing regime are creating uncertainty and potential higher prices moving forward.
- ERCOT. Growing concerns over congestions costs in the South Zone are likely to be an issue in 2015. EMEX believes that these congestion costs are stemming from the same phenomenon that increased basis in the West Zone a few years ago, namely an unexpected increase in demand driven by production growth in the Eagle Ford Shale. Given the ERCOT market’s high reliance on natural gas, EMEX anticipates that power prices will mirror moves in the natural gas market. Finally, there are concerns about future installed reserve margins which should make longer terms more attractive for customers looking to protect their budgets and manage their energy price risk.
EMEX specializes in consulting with commercial, industrial, and governmental clients to help them manage their energy cost risk for both electricity and natural gas markets which are open to competition, through its Flagship platform: The EMEX® Reverse Auction.
EMEX’s Flagship platform, The EMEX® Reverse Auction - recognized for its Innovation and Excellence in Electricity Procurement- is available for Natural Gas Procurement throughout the Northeast and Midwest. Through this platform, EMEX already helps procure billions of kilowatt-hours of electricity for its customers throughout the deregulated states, reducing energy expenses by over one hundred million dollars annually.
About EMEX, LLC
EMEX is a leading energy consulting firm specializing in delivering unique solutions to help clients nationwide understand and manage their energy risk exposure. Drawing upon over a century of energy market expertise and utilizing technology to facilitate energy transactions and provide EMEX clients with exceptional market transparency, EMEX is changing the way consumers secure their future energy needs. For additional information, please visit our website at: http://www.EnergyMarketExchange.com
The above forecasts are based on the best available information at the time the forecast was issued and are not intended to be a guarantee of future market outcomes. The information contained herein comes from sources which EMEX believes to be reasonably reliable and accurate. EMEX makes no warranty, guarantee, or representation as to the accuracy of the data contained in this press release.