As you are aware, natural gas prices directly impact electricity costs, especially in Texas. We saw another very interesting development with this past Thursday’s storage report.
The analysts collectively were looking for a build up of 96 bcf. Thursday’s report only came out with a build of 90 bcf. Normally that would produce a significant run-up in natural gas pricing, but the current (August) contract only went up 8.5 cents in trading Thursday after the report was released.
On Friday prices DROPPED 6.6 cents after investors realized 1) cooler weather still was forecast for the Mid-West; 2) the 90 bcf increase was 47 bcf greater than the corresponding week of last year; and 3) it was 44 bcf greater than the corresponding week for the 5-year average. That is HUGE!
The new current contract (September) closed Friday at $3.787 begun trading today already down another 4 cents. I believe pricing for natural gas has fallen into a new trading range between $4 and $3.60. Electricity prices will be lower this summer due to the drop in gas prices, and with the cooler weather. Customers should take advantage of this and lock in long term rates. Record natural gas production should help us maintain low prices through October when we will see whether this winter will be as cold as last winter.