The month of September was uneventful and energy prices traded relatively flat. However, as we moved into October, the Bears immediately tried to push prices down and made some progress. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX)fell 2% closing at $0.388/therm while the 12-month average price for peak power on the PJM fell less than 1%.
The Bears tried to get everyone to focus on the natural gas storage report this week. This week's gas injection was 112 Bcf, a record high for September. While this injection was unusually large and did place some downward pressure on energy prices, the price drop was tempered by the fact that storage levels were still 11% below the five-year average with five weeks left in the traditional re-fill season.
The Bears maintain that with over one month to go before the start of the unofficial heating season, and with the current minimal demand for heating and cooling, that we should be able to refill the caverns by November 1st. So where do prices go during the month of October?
Perhaps we can use the month of September as a barometer. From September 2 to October 2, 2014, natural gas prices fell less than 1% while electricity prices rose 3%. If weather remains mild some analysts think we can expect the same pricing results in October.
The big price swings are likely to hit after November 1st as winter weather has a huge impact on energy prices. If you can predict the weather then you can predict the short term direction of energy prices.
Here are two forecasts I just read: NOAA, for now, is forecasting a "fairly normal winter temperature wise" for the 2014-2015 winter season. Conversely, The Weather Centre forecast states that "if you put the pieces together, the climate pattern that made the winter so cold last year may very well return again this winter."
Weather is the wild card. If you want to protect your budget from the price spikes that come with a cold winter, this is a good time to look at your renewal strategy.