The recent volatility in the world oil markets has shaken producers, processors and investors alike. The recent record 300% drop in the May contracts price is unprecedented.
How will the retail natural gas and electricity markets respond? That is the question that the industry at large is pondering. Natural gas prices, as traded on the NYMEX, did not plummet along with crude. Rather, that pricing held steady and in fact rose in overnight trading. That market remains currently flat. Prices, especially in the near-term, remain relatively low, a holdover from the winter bear market and still present a significant buying opportunity. There are some signs that the market will firm up as we get closer to summer. As such, Prospect Resources will be more aggressive for our client pool in the near-term, we will look at the right opportunity to hedge for the coming gas year and inject gas into storage. The summer / winter price differential make this the right time to pursue that option.
Electricity prices have firmed up a little bit in recent weeks, but still give us a good opportunity to hedge, especially for the forward years 2022-2025. We will continue to monitor the markets and jump on the right moments for that activity.
Prospect Resources Inc. (PRI) is a firm that specializes in managing energy procurement (gas and electricity) for medium and large commercial and industrial clients.
The only constant in the energy markets over the past 15 years is price volatility. This reality turns energy procurement into a very risky business.
PRI's Layered Hedging strategy is a proven alternative.
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