The Bulls are trying to make a run. The energy market experienced a second straight week of price increases. For this seven-day report period, the12-month average price for natural gas on the NYMEX rose 10%. The 12-month average price for peak power on the PJM rose 2.7%. Over the last two weeks, the 12-month average price for natural gas on the NYMEX has risen 14.7% and the 12-month average price for peak power on the PJM has risen 5.2%.
The recent price increases are fueled by reports that indicate supplies will decrease and demand will increase. On the supply side, the fear is that natural gas producers are shutting-in their gas rigs because it is financially unattractive to drill at these pricing levels. The gas-directed rig count is 269 rigs lower than the rig count reported this same week last year. We are 45% below the five-year average gas rig count of 1,109.
On the demand side, analysts are projecting an increase in gas demand because the electric power plants are switching from coal to natural gas at record levels. Plus, according to J.P. Morgan, we may see additional demand coming from liquefied natural gas as "the potential to join global markets through liquefied natural gas (LNG) exports" continues to grow.
For now, natural gas and electricity prices are trading a 10-year low because we have a huge supply of natural in storage. Stay tuned. Summer is on the way, and a hot summer can impact storage levels.