Cold weather and high energy demand have once again placed upward pressure on energy prices this week. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 1.8%, and the 12-month average price for peak power on the PJM rose 1%. Luckily, the moderating weather forecast kept prices from make any big gains.
The month of January was marked by record energy demand across the country. According to Bentek, "the U.S. in January consumed 251 Bcf more gas than any other month of record." Additionally, according to Bentek, the "U.S. power burn in January averaged 21.4 Bcf/day, an all-time record high for January."
The cold weather patterns and the record high energy demand over the last six weeks have kept upward pressure on energy prices. Since Jan. 1, 2014, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) has risen 10% and the 12-month average price for peak power on the PJM has risen 17%.
Where do energy prices go from here? The concern is that the natural gas storage bubble has disappeared. Natural gas storage levels are now 34% below last year's levels and 27% below the five-year average. Last year at this time, natural gas inventories were 16% above the five-year average.
If February and March are colder than normal, the industry will spend all Spring and Summer filling up the depleted storage fields, keeping upward pressure on both electricity and gas prices. We need a warming trend to help keep on a lid on energy prices. Luckily, NOAA's 6-10 day outlook is finally calling for above average temperatures east of the Mississippi.