Energy prices rose for the third consecutive week. At this point, natural gas and electricity prices have now risen six out of the past seven weeks. For this seven day report period, the 12-month average price for natural gas at the well-head rose 2.3%, and the 12-month average price for peak power on the PJM rose 1.1%. Crude oil prices rose to a 31 month high of $112 per barrel.
The recent price increases for electricity and natural gas are attributed to a temporary spike in natural gas demand. During the spring, you expect a decrease in gas demand because you do not need gas for heating or cooling. However, over the last few weeks, natural gas demand has not dropped as much as expected because the natural gas is being burned to produce electricity. Analysts note that a large number of nuclear power plants have gone off-line for routine maintenance work over the last few weeks. Gas Daily references a quote by Tim Evans, an analyst from City Futures Perspective, quoting "nuclear capacity taken off-line has increased by roughly 40% from the same time last April." Instead of gas getting injected into storage, it is burned to produce electricity.
Natural gas storage levels are now 11% below last year's levels. On March 24, 2011, we were 1% below last year's levels. We will need to keep an eye on the storage levels as they can impact prices.