Navigating the energy price horizon

In February, one of the most noteworthy phenomena was the remarkable drop in energy market prices. Electricity and natural gas prices saw a decline due largely to the fact that winter never truly arrived. This temporary shift has benefited those who took advantage, and surprisingly, February over the past several years has proven to be one of the more favorable times to make energy purchases.

The March 2024 natural gas contract settled at $1.615 per MMBtu, which was the lowest settlement price since July 2020. Since then, prompt month natural gas prices have risen slightly. Although, when we look down the strip, natural gas prices have risen substantially beyond 2024. SmartestEnergy’s trading department has been closely analyzing the price trends over the past years to stay up to date with market activity. Head of Trading, Tyler Little states, “Based off of the Henry Hub cash price data, cash and prompt gas were about as low as they have ever been historically.” With natural gas being the primary fuel  for electricity generation, as the price changes, it directly impacts the cost of electricity. However, numerous factors influence the pricing of natural gas, including federal and state regulations, environmental and renewable agendas, power plant retirements, weather conditions, and LNG exports, leading to this increase in pricing and making future pricing less predictable. 

Forward energy curves indicate relative value in the near term, while the out years are responding to the evolving market structure. Consideration of risk mitigation strategies should be at the forefront when it comes to purchasing decisions. Channel Partner Manager and industry veteran, Jordan Dialectos, states “Despite the prevailing short term bearish sentiment in energy spot markets, there exists significant long-term upside price risk. Market dynamics, geopolitical factors, and supply-demand shifts continue to prompt market shifts in energy prices. Technical indicators suggest constraints on price downturns from current levels, highlighting the importance of proactive energy procurement strategies that employ dollar-cost averaging to effectively navigate the volatile energy markets,” says Dialectos. Therefore, taking advantage of the current prices while strategizing long-term risk mitigation in supply agreements can provide protection against the uncertainty in the market. For more information on procuring energy and exploring partnership opportunities, we encourage partners to reach out to their dedicated Channel Partner Manager.