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September is a pivotal month by nature in North America; the seasonal shift begins to take hold as autumn creeps in, preceded by an onslaught of allergens and brand-name loratadine advertisements. Labor Day marks the unofficial end of summer, as school supplies stock the shelves and students return to classes, the eternity that is baseball begins to wind down with vacation sunsets, and football begins its nightly dominance of evening programming. Tropical depressions become furious tropical storms become the onset of the oftdevastating Atlantic Hurricane season. Flora and fauna alike endure their own transformations, either shedding or gathering excess in preparation for the months that lie ahead, guided by the invisible yet unrelenting forces of the multiverse. F. Scott Fitzgerald perhaps most aptly describes the metamorphosis of autumn in The Great Gatsby: “Life starts all over again when it gets crisp in the fall.”

True to form, within the energy industry, September is also a focal point as it typically marks the arrival of the second shoulder period, when both heating and cooling demand are relatively subdued. Much like our furry friends and fleeting perennial patches, it is a time in which the now-ambient temperatures force a thorough review of the reserves that have been gathered over the summer, with a keen eye to the coming winter. If you’ll recall, there were grave concerns about the natural gas storage deficit (specifically, a 15% deficit to the five-year average) heading into last winter that led to some of the highest and most volatile prices this decade, as the winter package (Dec-Feb) hovered around $4.50/MMBtu for a few weeks. As it stands today, natural gas reserves are markedly more ample when compared to where they were last year (up 14.5%), and we’ve seen a consistent contraction on the five-year deficit throughout the summer, now at a mere 2.4% deficit, in large parts thanks to record production and a mild summer. Additionally, with the five-year deficit projected to narrow by +160 bcf over the next seven weeks remaining in injection season, we should be looking at an eventual surplus by the time mid-late November rolls around. Further compounding these long-term bearish conditions, some extended lateseason heat is expected for the majority of the major demand centers across the country, largely clearing any concerns of early heating demand that would lead
to a bull run-up in the natural gas and power markets, though it should provide some short-term price support over next two weeks. All told, I expect a continuance of excellent buying/hedging conditions in the market for the next 4-5 weeks, though the bottom of the market appears to have come and gone in August. The metamorphosis of this market, and the typical seasonal increases appear to be yet ahead. Farmers’ Almanac has released its 2019-2020 winter forecast, which, if accurate, would seem to indicate we are in for a relatively harsh winter. I will be keeping a keen eye on the winter forecasts (there are several) over the next few weeks, as they will indubitably have a significant impact on price trajectory and momentum as we move through October.

On the regulatory front, there was a major development last week with respect to electricity deregulation in the state of Virginia. In a major win for retail choice and competition in the state, the SCC shot down a Dominion Energy petition to
prevent customers from purchasing 100% renewable power from a competitive service provider, and ordered the behemoth to continue processing enrollment requests. This effectively re-opens the door for customers to competitive supply options in the state – the only caveat is that the product must include a 100% renewable energy component.

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