ERC Price Benchmarks: Week ending Sept. 9, 2016

Short-Term Price Benchmark Trends

After rising for three straight weeks, the Energy Research Council’s national average benchmark price for retail electricity declined last week by -1.84%, to $0.0730 per kilowatt hour (kWh). With last week’s drop, electricity prices are now only 0.34% higher than this time a month ago.

Prices decreased most notably last week in New York (-5.60%), and to a lesser extent in Maryland (-2.61%), Delaware (-2.54%) and New Jersey (-2.52%).  Every other deregulated state also saw electricity prices drop from the previous week.  Electricity prices are still higher than they were a month ago in Maine (3.74%), the District of Columbia (2.36%), and Rhode Island (1.84%). In contrast, Texas has experienced a month-over-month decline in retail electricity prices of -4.89%.

Long-Term Price Benchmark Trends

After a bumpy week, the NYMEX natural gas prompt contract ultimately ended last week unchanged at $2.80/MMBtu. Prices rose sharply toward the end of last week based on a weak injection into storage and forecasts of hotter weather. From a technical perspective, the Oct Nymex Nat Gas contract boundaries are now around $2.782/mmbtu on the support end and $2.925/mmbtu on the resistance side. This trading range has been in play since the middle of August. The 12 month natural gas strip has mostly been between $2.90 and $3.10 since the summer began, and we’re still in that range.

Except for the Marcellus/Utica regions, most producers are not making any money with natural gas prices below $3.00/MMBtu. Natural gas traded to highs of $3.022 on July 1st but failed to sustain the momentum. Since then the market has attemped to breach the $3.00 mark twice, but with the same result. Over the past 26 years, the natural gas futures market has spent little time below the $3.00 level. Natural gas is a volital market and there is presently more pressure on prices going up than going  down.

The summer began with a 27% year-over-year natural gas storage surplus. By this time last year, the injection season had added a total of 1.801 trillion cubic feet to stocks. But because of prices below $3/MMBtu, injections have declined by 46% on a year-over-year basis. Moreover, inventories that had been as high as 50%+ above last year’s level and the five year average just a few months ago are in the single digits for the first time this year. While a natural gas surplus continues to exist, low prices have significantly reduced production and subsequently the inventories we are carrying into this winter.

Data provided by Energy Research Council