We have experienced a small price decrease for the fourth week in a row. During this seven-day report period, the average 12 month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 1%. The 12-month average price for peak power on the PJM fell by less than 1%.
Although many variables impact energy prices, weather has a major influence on the movement of natural gas and electricity prices. Spring is a good time to look at energy prices because this season is also known as a "shoulder season." During this time of year, you may see some downward pressure on energy prices because, in theory, you have minimal heating demand as well as minimal cooling demand.
Although the recent price drops may be short-lived, these drops are best explained by saying "spring is here." The evidence can be found in the natural gas storage numbers. In this week's natural gas storage report, we saw an injection of 99 Bcf, which was an above-average injection for the second week in a row. Thanks to these last two larger-than-normal injections, we have cut into the storage deficit for the second week in a row.
However, forecasters are calling for a return to normal weather, which means it will be time to turn on the air conditioners. So, this "shoulder season" may indeed be short-lived. If hot temperatures arrive, and natural gas is directed to the power plants instead of the natural gas storage fields, we may begin to see some upward pressure on both natural gas and electricity prices.