News & Updates

Winter Natural Gas Spikes Will Have a Lasting Effect for Utilities

Jan 2, 2019

As expected, the 2018/2019 winter season has been full of volatility in the natural gas markets, both in North America and globally. Prices rose dramatically in November with cold weather forecasts. In much the same way, prices dropped significantly near the end of December among mild weather forecasts for the beginning of January.

 

Natural Gas Futures

 

With storage levels continuing to be at the bottom of the range for this time of the year in over a decade, expect to see these massive swings in pricing continue as weather forecasts change. With storage levels hovering between 18-20% below both last year and the 5 year average all winter, weather forecasts will be the primary driver for pricing.

 

Nat Gas Working

 

Businesses that have hedged their natural gas pricing are seeing significant savings this winter. Those businesses on the utility rate, however, would be wise to consider a switch to market rates for their natural gas in the coming months. Enbridge and Union Gas have been stuck selling gas at much lower rates than they have been purchasing it for, as they are required by the OEB to set 3 month pricing ahead of time. In order to recover from this cost difference, both of the two major Ontario natural gas providers are increasing their rates. Union Gas has increased their rate by 3¢, with Enbridge increasing their rate by 2.5¢ to a little over 18¢/m3 and 13¢/m3, respectively.

 

Nat Gas Rates

 

These rates will hold until at least April, although they will likely persist longer as the utilities recover lost profits from the winter months. If January and February turn out to be colder than currently forecasted, businesses sourcing their gas through a utility should expect to see high rates for all of 2019, with the potential for rates to increase further.

 

For more information, or to learn why right now is the perfect time for businesses purchasing natural gas at a utility rate to switch over to a market rate, please send me an email at lclimenhage@ces-energy.com and let’s start a conversation.