Over the last few weeks, natural gas and electricity prices were moving downward. However, as usual, the streak was short-lived. For this seven day report period, the 12-month average price for natural gas at the Henry Hub well-head rose 4%. The trading price for peak power on the PJM electricity grid rose 1%. Crude oil prices rose from $91/barrel to $95/barrel.
The news stories that placed upward pressure on energy prices this week were related to the weather. In fact, the season's first tropical storm formed in the Gulf of Mexico this week. It was named Arlene. Luckily, Arlene dissipated into a weak low pressure system over Mexico. In addition to the tropical storm, forecasters called for the return of above average temperatures over the next 6 to 10 days. Hot weather translates into higher demand for natural gas and electricity.
Then, to add fuel to the flame, Barclay's analysts reported that more and more electric generators were switching from coal to natural gas. Plus the analysts mentioned that the drillers were shifting their attention from gas wells to oil wells. In essence, Barclay's predicted that prices would move upward in the next year.
It is hard to predict with certainty where prices will be in 12 months. However, the great news for now is that natural gas and electricity prices are still hovering near a seven year low.