For this seven day period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX)increased 2% closing at $0.456/therm, while the 12-month average price for peak power on the PJM fell 1%.
As you can see from the pricing graphs included in this newsletter, both natural gas and electricity prices have been trading in a relatively tight range over the last five weeks. Prices decreased a couple weeks in a row then increased a couple of weeks in a row. However, since May 2, 2014 the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) has decreased by 2% and the 12-month average price for peak power on the PJM has decreased by 3%.
Spring is almost over and we are happy to exit spring with a price decrease. However, analysts are very worried about the upcoming months. The first day of summer arrives on June 21, 2014.
Although the spring weather was uneventful and generally kind with regard to prices, summer poses all sorts of threats to energy prices. The first concern is that we are still dealing with a very large storage deficit. The natural gas storage fields are 37% below the five-year average.
We have a long way to go to refill the caverns to 3,400 Bcf by November 1st. We need 23 consecutive injections above 82 Bcf if we want to overcome the deficit created by this past winter's huge heating demand. If we have a hot summer and natural gas is directed to the power plants instead of the storage fields, it may be difficult to reach a respectable storage level by Nov. 1. If we don't minimize the storage deficit in the next few months, we could see upward pressure on energy prices.
The other summer threat to watch is the hurricane season. Sunday, June 1, 2014 marked the official start of the hurricane season. Luckily, the National Oceanic and Atmospheric Administrations "predicts a relatively inactive June-November hurricane season this year."
So where do we go from here? For now it seems the answer is still highly dependent on the summer weather. If you can lock-in a rate now that is close to last year's rate, you may want to consider the early renewal option.