For many of you reading this, the 2017-2018 home heating season has seen a bit of a disconnect between hub prices at Conway and Mt Belvieu and what you have experienced FOB the terminals near where you live and work.
This has been especially true in the Chicago area, The Ohio Valley and into the Northeast, since Christmas.
The three areas I just mentioned have experienced their highest rack pricing since 1Q 2014.
But pricing at the trading hubs have not followed suit, and a few weeks back, the trend for hub values was down while the trend for terminal postings was higher.
“When (not if) traders get to the point where they no longer feel low inventory concerns exist, then the risks of a price run up this winter will also fall by the wayside and the market risk will lean to downside risks.”
In hindsight, I should have added a few more words to this sentence. I should have said ‘the risks of a price run up at the hubs’.
Here is how the daily OPIS average has tracked since 12/20/17:
We saw an in-season high average of $.9893 on January 2nd. Yesterday’s settle was $.8125, the lowest daily OPIS average since September 1st, 2017.
I think it’s somewhat safe to assume that traders are at a point where they no longer fear inventory concerns for this winter, and therefore, I also think it’s safe to assume we have seen the high-price mark at the hubs for this heating season.
I wouldn’t rule out another spike ‘off hub’ at the aforementioned regions of the country, especially if we see the Polar Vortex split and cause havoc in the lower 48 states over the course of the next four to six weeks, as some are still forecasting.
However, I wouldn’t bet on it at this point and the highest levels of pricing pain for this season appear to be in our rear-view mirror.
Now is a good time to take a look at next year in earnest…I will be in touch with some of you very soon on this front.