Here we go again. Energy prices are range bound. They bump up one week and are down the next. Last week, we saw an unexpected jump as natural gas prices rose 6.7%, and the 12-month average price for peak power on the PJM rose 3%. However, for this seven-day report period, the average 12-month price for natural gas on the NYMEX fell 3.4%, and the 12-month average price for peak power on the PJM fell 1.7%.
We can explain most of this week's price drop by looking at the weather. The brutally hot days of summer are behind us. The arrival of cooler temperatures has reduced the demand for natural gas and thus placed some downward pressure on prices. In fact, according to data from Bentek Energy, "consumption for natural gas for power generation declined 13.1 percent, reflecting reduced air-conditioning demand as summer temperatures continued to subside."
Fall officially arrives on Saturday, September 22, which normally means lower demand for heating and cooling. Even with the arrival of autumn do not expect prices to fall. Many analysts expect energy prices to remain range bound until we see how winter demand materializes. The official start of winter is December 21.
For now we are enjoying cool weather and energy prices that are trading near a nine-year low. But stay tuned, mother nature is unpredictable and can have a huge impact on the direction of energy prices.