In last Friday's newsletter, we reported that the 12-month average price for natural gas rose 4% and the price for peak power on the PJM rose 1%. However, the market did a 180% turn this week. For this 7 day report period, the 12-month average price for natural gas at Henry Hub fell 4% and the price for peak power on the PJM grid fell 1%.
The analysts pointed to a couple of variables that placed downward pressure on energy prices this week. For starters, EIA reported, for the third week in a row, that this week's natural gas injection was much higher than average. In fact, this week's gas injection was 30% higher than a year ago. (Please see our storage article for more details.) In other words, the supply component was looking good this week.
Next, analysts were concerned that the upcoming economic reports would indicate that the economy is growing more slowly than expected. A sluggish economy means low demand for natural gas and electricity. If natural gas supply is high and demand is low, we tend to see downward pressure on energy prices.
However, as you know, commodity prices are very fickle. Energy prices are likely to move upward as soon as the marketplace receives word that a heat wave or a hurricane is on the way. For now, we are all very happy that energy prices are still hovering near the 7 year lows.