The natural gas and electricity markets wrestled to a draw this week. During the four weeks prior to this seven-day report period, the 12-month average price for natural gas on the NYMEX had risen 21% and the 12-month average price for peak power on the PJM had risen 8.8%. However, that price rally stalled for this seven-day report period. The12-month average price for natural gas on the NYMEX actually fell 1%, while the 12-month average price for peak power on the PJM remained flat from last week.
For some reason, the energy markets were not spooked by this week's natural gas storage report, even though the gas surplus shrunk for the fourth week in a row. This week, the natural gas surplus shrunk another 3%. We are now 38% above the five-year average. Since March 8, 2012, the natural gas surplus over the five-year average has shrunk from 51% to 38%.
Calmer heads seemed to prevail this week as analysts reminded everyone that the storage surplus was still at a record-high level for this time of year. In fact, some analysts worry that storage will be stuffed full before the injection season ends on October 31, 2012.
All eyes are on the gas bubble. If we have a hot summer, demand will increase and the gas bubble will likely shrink. A hot summer will place upward pressure on energy prices. If we a have a cool summer, the gas surplus will likely grow and thus place downward pressure on energy prices. We really are at the mercy of Mother Nature.