For this seven-day report period, the average 12-month closing price for natural gas on the New York Mercantile Exchange (NYMEX) came in at $0.469/therm, a 3% increase from last week. Meanwhile, the 12-month average price for peak power on the PJM closed flat relative to the previous week's close.
Luckily, since March 1, 2014 energy prices have been unable to sustain any big rallies like the ones we experienced from November 1, 2013 to February 28, 2014. Apparently the traders are now focused on the fact that the peak heating months are over and that Spring weather is on the way. Since March 4th the average 12-month closing price for natural gas on the New York Mercantile Exchange (NYMEX) has only risen 1% and the 12-month average price for peak power on the PJM has only risen 1.6%
Although Winter is officially over, don't be lulled to sleep. The results of this past Winter will likely linger for the next six months because the unusually cold temperatures that hit the U.S. wreaked havoc on the natural gas storage fields. In fact, according to the U.S. Energy Information Administration, "this winter's gas withdrawal season (generally considered to be from the beginning of November to the end of March) saw the largest storage withdrawal on record."
According to EIA, the natural gas storage levels are 55% below the five-year average. This means the industry will need to work extra hard to replenish the storage field this summer. If we have a hot summer, we will see a double demand component where the power plant operators need natural gas to fuel their turbines and the gas utilities will need more gas than usual to replenish the storage fields. This double demand component could place upward pressure on energy prices during the summer.