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Market Monitor – Long-Term Natural Gas Contracts Can Help Mitigate Current High Prices
As we face the current elevated market, longer-term contracts may provide more advantageous rates that can help lower overall costs by mitigating the impact of near-term high prices with lower futures prices.
Unprecedented circumstances, including the extreme winter weather that swept most of the country in February, record U.S. gas export levels, and record-breaking summer heat in the western U.S., have led to reduced natural gas storage levels pushing 2021 prices to average 85% higher than 2020 prices year to date.
Natural gas futures prices have also increased significantly. Currently, the average cost of the commodity for the next 6 months is over $4/MMBtu. However, the average natural gas cost for the next 24 months is less than $3.50 and decreases further to approximately $3.25 for the next 36 months. See chart below.
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