For this two week period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) rose 1% closing at $0.474/therm. Meanwhile, the 12-month average price for peak power on the PJM also rose 1%.
This Spring, natural gas and electricity prices have been relatively rangebound. From March 1, 2014 to April 24, 2014 natural gas and electricity prices have risen 4% and 3% respectively. Luckily, energy prices have been unable to sustain any big rallies like the ones we experienced this winter. As you may recall, from November 1, 2013 to March 3, 2014 the average 12-month closing price for natural gas on the NYMEX rose 25% and the 12-month average price for peak power on the PJM rose 26%.
Spring can have a calming effect on energy prices because you typically have minimal demand for heating or cooling in the Spring months. However, don't be lulled to sleep. Summer is on the way.
The big concern for now is that we will enter the summer season with the natural gas storage fields at an 11 year low and 53% below the five-year average.
In order to re-fill the storages to a respectable level of 3,400 Bcf prior to November 1st, the industry will need to inject an average 86 Bcf per week. (Note: The record average weekly injection during the re-fill season was approximately 80 Bcf in 2003 according to Gas Daily and EIA.)
The rush to re-fill these caverns during the summer months will create an additional demand component for natural gas. 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.
I leave you this week with an interesting fact that I read in a recent EIA report that relates to the concerns noted above: "Natural gas-fired power plants accounted for just over 50% of new utility-scale generating capacity added in 2013. Solar provided nearly 22%, a jump from less than 6% in 2013. Coal provided 11% and wind nearly 8%."
Stay tuned. Summertime is the next big wild card that can impact energy prices.