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2017 and 2018 Electricity and Natural Gas Review and Forecast

           US - Energy News

 
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When we look at the energy environment as risk managers, we ask many questions about where spot electricity and natural gas prices will be in the next 12, 24, 36, and 48 months. We understand that technology can drive prices even lower. That said, we have not changed our fundamental belief that energy markets are eventdriven markets with extreme upside risk. It would be impossible to write this article without noting the extreme pricing seen in the natural gas and electricity markets in the last few days of December and the first five days of January with the colder weather. In the Illinois markets, natural gas and electricity spot prices have doubled for these days. This is a muted move compared to other parts of the Eastern Interconnect where gas prices have risen 600% or more for these same days. It does not take too many days of that type of pricing to move a yearly average higher. So far, the forward curves in PJM/ComEd are only pricing a modicum of event risk and remain priced for perfection. Pricing events in energy commodities can happen at any time for different reasons and durations with the volatility of the price moves differing. When forward commodity/energy markets are priced for perfection as the Illinois energy market appear to be, consumers of energy should be thinking about fixing their energy prices. We will continue to monitor the markets over the coming year for information on future pricing.

Analyst David Mousseau
Source – PJM, Chicago Mercantile Exchange (CME) and Reuters


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