Natural Gas Prices See Brief Spike

Wholesale natural gas prices jumped to their highest level since January earlier this week, according to Bloomberg. The price reached $3.105 per MMBtu on May 19 before falling back to $2.948 per MMBtu. Gas storage inventories are 66 percent higher than at this time last year. The Wall Street Journal noted that speculators anticipate they will sell gas contracts when prices hit $3 per MMBtu, effectively putting a price on the commodity. The Energy Information Administration (EIA) reported that gas production continues to grow, despite rapidly falling rig count, as companies focus on exploiting their most productive drilling sites.

Implications for Retail Energy

This type of short-term blip is unlikely to affect long-term retail electricity or gas supply contract prices. Variable prices could see a small, temporary increase. More importantly, retail buyers should monitor market prices to see if short-term price spikes signify longer-term trends. Last week, Retail Energy Buyer explored EIA’s prediction that natural gas prices are likely to trend upward beginning this summer.

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