Although natural gas and electricity prices were relatively flat during the three-week period of August 23 through September 13, 2013, we have experienced some price volatility over the last two weeks. Last week natural gas prices on the New York Mercantile Exchange (NYMEX) rose 2% and peak power prices on the PJM rose 1%. However, during this week's seven-day report period, we saw this trend revers, as the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 4.4% and the 12-month average price for peak power on the PJM fell 1.2%.
This week's price decrease is tied to the weather, or more specifically, the absence of extreme weather. Summer has ended. The first day of Fall is September 22. It is called the autumnal equinox. On this day, the daylight hours are roughly equal to the nighttime hours. In the energy business we call this time of year the "shoulder season", meaning that cooling demand, for all practical purposes, has ended and that heating demand has not started. This decrease in demand for either heating or cooling can place some downward pressure on energy prices, as evidenced by the numbers from this seven-day report period.
With moderate temperatures projected east of the Mississippi for the next 10 days, it is likely that we will continue to see minimal demand for either heating or cooling over the next two weeks. As a result, it may be difficult for the Bulls to stage a price rally during this time. However, as soon as the first cold front arrives, all bets are off.