From September 2 - October 2, 2014 natural gas prices fell 1% while electricity prices rose 3%. As we moved into the first week of October, prices inched downward. For this seven-day report period, the average 12-month price for natural gas on the New York Mercantile Exchange (NYMEX) fell 1.8% closing at $0.381/therm and the 12-month average price for peak power on the PJM also fell 1%.
The story for now is the mild weather, giving way to minimal demand for either heating or cooling. Prices are responding to the fact that natural gas supply is high and demand is low. This slight demand/supply imbalance is placing some downward pressure on energy prices.
However, as soon as the first cold snap hits, you are likely to see some upward pressure on energy prices. Cold temperatures have a big impact on pricing because, according to the Energy Information Administration," natural gas is the most widely used fuel source for space heating in the United States, with 49% of the nation's 119 million households relying on natural gas during the past winter (October 2013 to March 2014) while 39% heat with electric, 5.5% with heating oil, 4.8% with propane, and 2.2 % with wood or some other fuel."
Even though natural gas supplies are high and demand is low, the Bulls have been unable to sustain any big price drops because the storage fields have not yet been filled. In fact, storage levels are still 10% below the five-year average with four weeks left in the traditional re-fill season.
Is this the calm before the storm? 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.