COVID19: Energy Market Update June 3, 2020

Published: June 3, 2020

Many areas of the country are beginning to reopen. This unprecedented pandemic and economic event coupled with the rapid decrease in oil markets and seasonality, saw historic lows in the electricity and natural gas markets. But much like the peak of the pandemic, the electricity and natural gas markets seem to be changing with an upward trend.

Last week’s trading days were limited due to Memorial Day. Tuesday and Wednesday began a powerful two-day rally of trading – driving the market into another week of solid gains. There was rising optimism over economic re-opening, declines in new infections, and progress in the development of new vaccine.

With civil unrest in many areas of the country, it is yet to be seen how this will ultimately affect the market. However, in the immediate turn, it appears the stock market continues to rise as investors look past the nationwide protests and riots and instead focusing on the economy reopening. Energy stocks were leading the way as of Tuesday, finishing 2.7% higher.

While surging oil prices spurred the energy share gains due to gaining favor of extending production cuts, natural gas (a better indicator of energy supply) may continue to decline. There continues to be a decline in demand and storage remains to near capacity, creating conditions to potentially keep the market low.

The charts below, provided by one of our vendors, show the low and the upward trend in pricing – articulating the average wholesale prices for energy supply. While these are not all-inclusive rates, they do show a strong indication of the current market conditions.

 

The chart reflects PJM West Hub prices. Average wholesale prices are based on a large block purchase of electricity at 100% load factor. Prices do not include charges for load following, imbalance or management fees typically included in retail supply quotes reflecting charges to the customer's meter. In addition, losses, transmission, ancillary and delivery costs are not included. Chart and information provided by supplier MidAmerican Energy Services.

 

 

The chart reflects New York-Zone G prices. Average wholesale prices are based on a large block purchase of electricity at 100% load factor. Prices do not include charges for load following, imbalance or management fees typically included in retail supply quotes reflecting charges to the customer's meter. In addition, losses, transmission, ancillary and delivery costs are not included.  Chart and information provided by supplier MidAmerican Energy Services.


As previously stated in a March market release, “Prices this low may not last as long as the virus. Buyers will look to defer or cancel contracts. Producers will curtail production due to lower demand. New generation will be unable to go online due to debt. State and federal governments continue change policy to spur the economy.” The charts indicate that trend is likely now changing.

If you have an electricity supply contract ending in the next 18 months, now is the time to be shopping. Diversegy, subsidiary of Genie Energy (NYSE: GNE), is a commercial energy advisor working with commercial and industrial customers. We have a nationwide portfolio of vendors that can help reduce electricity costs. In addition, we have a wide variety of strategies outside of procurement that can help large & complicated users reduce their energy expense further (i.e. solar, LED, HVAC, Demand Response).  

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