As we entered early autumn, the demand created by customers who began heating their homes helped cause a brief run up in natural gas and electricity prices. From September 7 to October 11, 2012 natural gas prices on the NYMEX rose 24% and electricity prices on the PJM transmission grid rose 9.8%.
However, since October 11, 2012, natural gas and electricity prices have have been relatively flat. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) dropped by 1.8% and the 12-month average price for peak power on the PJM both rose by less than 1%.
One variable that is keeping a lid on the price increases is the natural gas surplus. We are starting the heating season with a record-high gas surplus. The natural gas storage surplus, on a year-to-year basis, is 2.9% above last year's levels. The storage surplus is now 6.6% above the five-year average.
Storages are full and we are ready for winter. The big question is whether or not the winter temperatures will be cold enough to significantly reduce the size of the gas bubble and place upward pressure on prices.