The weather forecast placed upward pressure on both natural gas and electricity prices this week. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 3% and the 12-month average price for peak power on the PJM rose 1.2%.
Energy prices ran up as the National Oceanic and Atmospheric Administration revised both their 6-10 day and 10-14 day forecasts. Both reports called for colder-than-normal temperatures for most of the country. This news should not have surprised the marketplace because today is the winter solstice, the official start of winter in the Northern Hemisphere. As you know, we will experience the least amount of daylight today as compared to any other day of the year. Nevertheless, the market heard the weather forecast and prices inched upward.
The weather will have to stay cold for more than 14 days if the Bulls want to keep this upward pressure on energy prices. It may be hard for the Bulls to sustain this price rally because the natural gas storage fields are very full for this time of year. In fact, as a result of this warm December, storage fields are now 1.8% above last year's levels, and 10.2% above the five-year average.
Stay tuned. Winter has only just arrived.