In last week's newsletter we reported that the arrival of cold temperatures had halted the recent collapse of energy prices, with natural gas prices on the NYMEX rising 4% and the price for peak power on the PJM rising 3%. However, this week, prices retraced themselves as the average 12-month price for natural gas on NYMEX fell 6% closing at $0.298/therm, while the 12-month average price for peak power on the PJM also fell 3%.
Although the Bulls and Bears have wrestled to a draw over the last two weeks, the Bulls have dominated the Winter season to date. From November 3, 2014 to January 22, 2015 natural gas prices have dropped 23% while electricity prices on the PJM have dropped 19% over the same time period.
However, do not be lulled to sleep as NOAA's recent forecast predicts colder-than-normal temperatures east of the Mississippi for the rest of January. In addition to the cold weather forecast, the natural gas storage deficit has actually increased for the second week in a row, with storage levels ending the week 5.5% below the five-year average.
For now, both natural gas and electricity prices are trading at very attractive levels thanks to record high supplies from the natural gas wells and the unusually warm temperatures we enjoyed in December. With natural gas and electricity prices trading near their second lowest level in ten years this is an attractive time to look at your early renewal strategy.