During the two previous updates covering the period of May 23 to June 6, 2013, natural gas prices on the New York Mercantile Exchange (NYMEX) fell a total of 9% and peak power on the PJM fell 7.6%. However, this week was less eventful. During this seven-day report period, natural gas prices closed flat and the average price for peak power on the PJM fell 1%.
There were no big news stories to spook the market this week. There were, however, two reports that may create some price volatility in the near future.
First, according to an article in Gas Daily, "Energy Secretary Ernest Moniz indicated Thursday that decisions on at least some of the pending applications to export U.S. liquefied natural gas would be made before year's end." If the United States becomes a big player in the natural gas export business, demand for natural gas would increase. The fear is that this new demand component could place upward pressure on natural gas and electricity prices.
A second report in the marketplace indicated that the industrial sector in the U.S. may begin consuming more fuel in the near future. A robust economy and low natural gas prices are bolstering the industrial demand component. According to the U.S. Energy Information Administration (EIA), "the industrial sector is responsible for nearly a third of total energy used in the Unites States." If the economy gets better, many of the large industrial users, like fertilizer plants and chemical plants, may begin consuming more gas in their manufacturing processes. This new demand component could place some upward pressure on energy prices.
For this report week, the energy markets were calm. However, stay tuned. Natural gas and electricity are two of the most volatile commodities traded in the world. This may be a favorable time to look at an early renewal strategy as both natural gas and electricity prices are trading near their second lowest level in nine years.