For this seven-day report period, the 12-month average price for natural gas on the NYMEX rose 1% and the 12-month average price for peak power on the PJM rose 2%.
During the month of February, natural gas and electricity prices have slowly risen. This increase was enough to neutralize most of the price decrease that occurred in January. Specifically:
- In January, the 12-month average price for peak power on the PJM fell approximately 9%. But, in February, the 12-month average price for peak power on the PJM rose approximately 5%. The result was an average price decrease of 4% over the two month span.
- The 12-month average price for natural gas on NYMEX decreased 12% in January but increased 11% in February. The result was an average price decrease of 1% over the two month span.
In other words, natural gas and electricity prices appear to be range bound.
Where do prices go from here? Natural gas and electricity prices are hovering near a 10-year low because supplies are high, thanks to shale gas production, and demand is low, due to one of the warmest winters on record.
Although natural gas supplies are very robust to date, analysts continue to point out that natural gas producers are beginning to shut-in some of their gas wells in an effort to place upward pressure on prices. For example, Gas Daily reported this week that two more producers, Carrizo Energy and Cabot Oil and Gas, were shutting-in some of their natural gas wells because it was economically unattractive to drill.
On the demand side, analysts note that the coal-fired electricity generation plants are getting displaced by natural gas-fired generators because gas is cleaner and less expensive to burn than coal. This switch to natural gas will create a larger demand for gas than we have seen recently.
As producers shut-in their natural gas wells and electricity generators switch their plants to gas, we may begin to see some upward pressure on natural gas and electricity prices. But for now, prices continue to look great.