For this seven day period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) increased 1.5% closing at $0.464/therm, while the 12-month average price for peak power on the PJM rose less than 1%.
As usual, market analysts focused on the bad news this week instead of the good news. Bad news spooks the market and ultimately places upward pressure on energy prices.
For example, this week, we saw a natural gas storage injection of 107 Bcf (Please reference the storage article for more details). This was the fifth consecutive triple-digit injection of the season which was only the second time in history that we have enjoyed five consecutive injections over 100 Bcf.
However, analysts were not impressed. With the cool spring temperatures in place over the last five weeks, analysts were looking for huge, record breaking injections. Even though these large injections have reduced the storage deficit by 15% since May 1, 2014 analysts were quick to report that the natural gas storage fields were still 35% below the five-year average.
Here is the concern: The first day of summer arrives on June 21, 2014. If we have a hot summer the natural gas will be directed to the power plants instead of the storage fields. A hot summer will likely worsen the storage deficit and thus place upward pressure on energy prices.
On the other hand, if we have a cool summer and the industry continues directing large amounts of gas into the storage fields, perhaps the analysts will become more optimistic about our storage position heading into November. The market place likes good news, but apparently no one likes to report the good news. If we can minimize the storage deficit in the next few months, we may see downward pressure on energy prices. Summer is the wild card.