For this seven day report period, the 12 month average price for natural gas on the NYMEX fell 5.2%. The price for peak power traded on the PJM grid fell 3.2%.
Analysts point to a number of variables that sparked this price drop. For starters, the weather cooperated this week with temperatures were cooler than the previous week. Thus, the reduction in the air conditioning demand meant that the power plants needed less gas. Then, Tropical Storm Emily formed near Florida but was expected to stay in the North Atlantic. This track posed no danger to the rigs in the Gulf of Mexico.
Another variable that received attention this week was the natural gas storage fields. Even though July was a very hot month, the recent injections were large enough to cut our deficit from a year ago. At the start of July, storage levels were 9.1% below last year's levels. However, as of today, storages levels were only 6.6% below last year's levels. This means that natural gas production is high. Thanks to the shale gas discoveries, supplies have been more than enough to offset the electric utility's increased demand for natural gas.
Over the last year, natural gas and electric prices have traded in a tight range. They are up one week and down the next. Please see the graphs in this newsletter for trend lines. The great news is that prices are still low relative to the last seven years. However, the summer is not over yet and hurricane season is still in play.