Due to the Thanksgiving holiday last week, we did not publish an issue on November 29. This week's Energy Update covers a two-week report period.
Falling temperatures continued to place upward pressure energy prices. For the fourth week in a row energy prices rose. For this report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 8%, and the 12-month average price for peak power on the PJM rose 1.8%.
Although natural gas production is at an all-time high, weather-based demand is driving the short-term direction of energy prices. With the early start to winter, all eyes are focused on demand instead of supply.
November was 17% colder than normal. The early arrival of cold temperatures created some larger-than-normal withdrawals from the natural gas storage fields. In fact, this week's withdrawal of 162 Bcf was the largest ever recorded in the month of November.
Although we entered the heating season on November 1 with natural gas inventories 1.5% above the five-year average, inventories ended the week 2.8% below the five-year average. Going from a surplus to a deficit has placed upward pressure on energy prices.
Although the official start of winter is not until December 21, cold temperatures are already here. The National Oceanic and Atmospheric Administration (NOAA) is predicting colder-than-normal temperatures east of the Mississippi for next week.
Stay tuned. Weather will be the wild card for the next few months. All eyes are focusing on the impact that these temperatures will have on the natural gas storage fields.