During the month of August, the Bulls slowly pushed electricity prices up 2% and natural gas prices up 4%. However, this week the Bears made a run. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 4.3% closing at $0.386/therm while the 12-month average price for peak power on the PJM also fell 2%.
This week's price decrease can likely be attributed to NOAA's new forecast which indicated that this week's short heat wave is over and that mild temperatures are on the way again for the first half of September. If temperatures stay mild, the industry should be able to eliminate the rest of the natural gas storage deficit by November 1st. This news placed downward pressure on energy prices.
With the arrival of the shoulder season, it will be interesting to see who will win the next tug of war. The summer season was clearly won by the Bears as mild summer temperatures and record high natural gas production placed downward pressure on energy prices for two out of the three summer months. From June 1, 2014 to August 31, 2014, natural gas prices fell 10% and electricity prices fell 9%.
So where do energy prices from here? As you know, weather is a big wild card. The concern for now is that the natural gas storage fields are still 15% below the five-year average. If temperatures remain mild analysts are optimistic that we can refill the caverns to 3,400 Bcf by November 1st. Winter predictions are on the way and will begin to impact prices.
Today's interesting fact: A recent article in Gas Daily discussed the fuels that are burned to produce power in our region. Our region is called the PJM region. According to data from Monitoring Analytics, PJM's independent market monitor, coal fired generation accounted for 43.6% of the power produced in June, followed by nuclear power at 34.4%, natural gas fired generation at 18.5% and wind at 1.2%. More and more gas fired generators are coming on-line, but coal is still a big part of the mix for now.