Natural gas and electricity prices have fallen for the second consecutive week. The 12 month average price for natural gas on the NYMEX fell 3.6%, and the 12 month average price for peak power on the PJM fell 4.7%.
Sluggish economic growth and mild weather are keeping a lid on energy demand. This weak energy demand is keeping downward pressure on prices for now. When demand is low, the unused natural gas can be injected into storage for use at a later date. In fact, natural gas storage levels just surpassed the all-time record high level of 3,849 Bcf set in November 2010. For more storage details, please see the EIA Storage Update included in this newsletter.
The weather forecasters are calling for a return of normal temperatures east of the Mississippi over the next 8 to 14 days. Colder than normal temperatures can quickly draw down a storage surplus. But for now, supplies look robust going into this winter.
Another variable to watch: The U.S. Environmental Protection Agency and the West Virginia legislature are studying the impact that shale gas drilling has on water supplies. Some analysts believe that proposed regulations could slow the development of the shale gas supplies.