The traditional winter heating season, November 1 through March 31, is over. As a result of one of the warmest winters on record, demand for energy was squashed, and the natural gas surplus grew to record high levels. Check out these numbers: The gas surplus is now 55% greater than last year at this time and 60% greater than the five-year average.
Thanks to the abundant supplies of natural gas from the recently discovered shale formations, and the absence of any significant heating demand this winter, natural gas and electricity prices are hovering at a ten-year low.
What happens next? It looks like natural gas and electricity prices have stabilized at this level for now. For this seven-day report period, the 12-month average price for natural gas on the NYMEX fell less than 1%, and the 12-month average price for peak power on the PJM fell less than 1%. This is the second week in a row that prices have remained relatively flat.
It is very hard to know if this is the bottom. Looking forward, summer temperatures, the hurricane season, and natural gas shut-ins are three big variables that could impact the future direction of energy prices.