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What’s the 2018/19 Winter Energy Pricing Outlook?

It is hard to believe that we are already talking about winter since we just turned off the air conditioning, but it can not be denied: Its almost November! Historically, the winter months offer the highest and most volatile energy pricing, but what should you expect this coming winter?


Nationally, the summer of 2018 had the most cooling degree days on record. (A cooling degree day is the number of degrees that a days average temperature is above 65 degrees F.) That means more energy was used to cool this summer than any other year. These high temperatures were lead by the month of September which was 4 degrees higher than 30-year normal temps.

Predicting weather for this winter is obviously a risky endeavor but numerous weather models are calling for a cooler than normal winter once we get past November. The El Nino pattern is predicted for this winter which can cause heavier snowfall and colder temperatures in Texas, the Midwest and the Southeast. Based on additional indicators such as sunspot cycles and snow cover in Eurasia, meteorologists are targeting February 2019 as the month to watch for extremely cold temperatures.

Bottom Line: If the weather models play out as predicted then this is bullish to pricing.

Natural Gas Storage

The extreme cold temperatures during the first part of this year created one of the largest ever withdrawals of natural gas from storage. This coupled with the high demand for natural gas in the electric generation sector due to the hot summer has left natural gas storage at its lowest levels since 2005.

These levels are currently 14% below the five-year average and 9% below the five-year minimum. Based on the weather forecasts, the Energy Information Association predicts natural gas inventories will end the heating season in March at 1.3 Bcf, which makes it one of the five lowest ending inventories since 2004.

Looking at the past decade, the last time storage was anywhere near this low going into the heating season was 2014. During that time NYMEX prices were near $4.00 for the prompt month. Current prices for November are $3.30.

Bottom Line: Entering heating season with inventories 14 % below the five-year average is bullish to pricing.

Outages and Retirements

Nuclear generation outages in September set a 10-year record with over 10.9 GW of capacity going offline for maintenance and refueling. This occurred at the same time we experienced one of the hottest Septembers on record. This has lead to less efficient, higher-priced generators setting hourly rates resulting in a 5% increase in electricity prices over the past month, just as we are heading into the winter.

Long term, coal retirements continue to be at the forefront of the news as the Trump Administration tries to figure out who will pay to subsidize them. Competition from cheaper natural gas generation is squeezing out the worst performing coal units with many of them running less than 40% of the time. This is too costly for most utilities, forcing them to make hard decisions about their continued viability. Nationally, the cumulative retirements ofcoal generation since 2010 have now reached 50,000 MW’s.

Bottom Line: Nuclear outage coinciding with time hot weather resulted in higher prices going into the winter. Eliminating high-priced coal generation from the grid is neutral to long term pricing but could create short term volatility during times of high demand.

Natural Gas Production

The rate of natural gas production continues to overcome many of the bullish factors. Production of dry gas in the lower 48 states has reached nearly 86 BCF/d which is a 13% increase over last year at this time. Shale production continues to take center stage contributing over 56 BCF/d or 65% of the total production. This is a staggering 27% increase over last year. Although prices are holding at relatively low levels producers are extracting premium value for the liquids contained in the gas stream. This premium value is keeping the producers pumping.


Bottom Line: The increase in natural gas production is the major anchor keeping prices down and is bearish to winter pricing.

Natural Gas Fired Electric Generation

Electric generation using natural gas as a fuel continues to increase. In the PJM footprint alone, 11 GW for 18% of the region’s total was added while 14.4 GW for 19% of coal was retired. Although not making up entirely for the lost production, the new generation operates at much lower costs than did the retired coal generation assets. This is mainly due to the efficiency of the new generation technology. Those generators utilizing the newer natural gas fired technology can typically generate electricity at 35% below the cost of the older coal technology.

Bottom Line: Making electricity cheaper is bearish to pricing.


Even though there are multiple bullish factors leading into the winter the fact that natural gas production is so high is dampening short term price impacts. However, if there is prolonged cold in the early part of the winter there is a risk of volatile short- term pricing as traders will be watching the already low inventories quickly be consumed.

Bottom Bottom Line: If you have any open positions this winter consider locking in a good portion to protect your prices.

Susanne is a contributor to The Ohio Manufacturers’ Association (OMA) Energy Guide blog. OMA’s Energy Guide is the path to customized energy pricing, terms, and smart energy management for Ohio’s manufacturers. To see how the OMA helps manufacturers purchase and manage the costs of energy, please visit:


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