Natural gas and electricity prices have fallen over the past three weeks. However, for this seven day report period, the bulls and bears wrestled to a draw. The 12 month average price for natural gas on the NYMEX rose less than 1%, and the 12 month average price for peak power on the PJM rose 1%.
This week, energy prices received some downward pressure after the Energy Information Administration announced that the natural gas injection was a whopping 111 Bcf which was 56% greater than the five year average of 71 Bcf. Storage levels are now above the five year average. In fact, we went from a deficit to surplus this week for the first time since April 15, 2011. This larger than normal injection points to the fact that that demand is still low and production is ample thanks to the shale gas discoveries.
Although the supply picture looks good, there was some economic news that placed upward pressure on energy prices this week. For starters, the government announced that the U. S. gross domestic product grew at an average annual rate of 1.3% which surpassed the estimated annual rate of 1%. Then, Germany announced its approval of a "bailout fund" which was designed to help ease the debt crisis in Europe. If the economy is healing, an increase in energy demand could follow. This news was enough to keep energy prices from falling.
In addition to the positive economic news, the weather forecasters were calling for the arrival our first cold snap. Cold weather will definitely increase energy demand and could place some upward pressure on prices.
If you have not locked your winter prices, this is a great time to discuss your renewal strategy with your WGES account manager. Prices are still near the seven year lows.