Both natural gas and electricity prices fell slightly for the second week in a row. The average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 3%, while the 12-month average price for peak power on the PJM also fell 1.8%.
This week, the market seemed to focus on the short term weather forecast and the natural gas production numbers. On the weather front, the National Oceanic and Atmospheric Administration (NOAA) revised their 6-10 day outlook covering the period of November 6-10. They are now forecasting above-normal temperatures east of the Mississippi for the second week of November. Warmer-than-normal temperatures means less gas may be needed for heating. This type of news tends to temporarily place downward pressure on energy prices.
On the production side, industry publications continue to report that natural gas production is at an all-time high. This week's Gas Daily referenced study by the U.S. Energy Information Administration (EIA) stating that, "natural gas production in the lower 48 states hit a record high in August." Even though the natural gas rig count is down 13% from last year, the technological advances made within the shale gas industry have moved production levels to record highs.
Minimal demand and record high production levels are keeping energy prices low. For now, both electricity and natural gas prices are trading near their second lowest level in nine years. However, the winter heating season is just starting. The winter weather will likely drive energy prices during the near term.