Record-setting winter ends; what lies ahead?
With many Gulf Coast rigs still out of service after last year's hurricanes and a new season upon us, uncertainty continues to guide the outlook for natural gas prices.Where are they now...and, more importantly, where are prices headed?
According to Jeff Keebler, MGE's Senior Director of Fuels Procurement, natural gas prices have gradually dropped—from record highs of more than $15 per dekatherm to around $7 per dekatherm this spring. Prices even dipped below $6 for a short time. "Prices are high from what we once considered normal," he said, "but they're actually in line with average natural gas market prices at this time last year.
Gulf Coast hurricanes significantly impacted natural gas prices last season and Keebler expects it may not be isolated to 2005. "It looks like we are in an elevated tropical storm cycle, which could last up to 20 years," Keebler noted. Last year's record 27 named storms are followed with predictions for 17 this season, which runs from June through November. These predictions are accompanied by data that suggests a 50% greater chance than normal of a hurricane striking the Gulf Coast this year.
As volatility dominates our fuel markets, he said that MGE's storage plans and related hedging strategies become even more vital components in managing gas prices. Gas currently being injected into storage caverns in Michigan will act as a natural hedge against price increases next winter.
Keebler noted that some recent news may cause false comfort because the summer futures market has seen natural gas prices trending downward. "Yet, a look six months out reveals that the prices for the upcoming winter don't share that outlook—prices remain at historically high levels," he said.
"We can't be selective in the data we work with or the news we hear," he said. "We've got to deal with everything that may affect the market—welcoming the good news but preparing for the unexpected."
Printer friendly
Email this page