Short-Term Price Benchmark Trends
The ERC national average benchmark price for retail electricity decreased again last week to $0.0738 per kilowatt hour (kWh). That amounts to a 1.7% decline since prices peaked three weeks ago. The average benchmark price, however, is 2.6% higher than when retail electricity prices bottomed out in March 2016. Prices decreased last week in each deregulated market except Texas, which remained flat, and New York, which increased 0.5 percent. In the past month, the average benchmark price for retail electricity has decreased the most (-2.5%) in Maryland to $0.0747/kWh. Texas remains the deregulated market in the U.S. with the lowest average benchmark price for retail electricity, while Massachusetts remains the state with the highest price. 
The National Oceanic and Atmospheric Administration forecast projects relatively mild temperatures across most of the U.S. As seasonable temperatures emerge, minimal cooling demand is likely through the first half of June.
The July 2016 NYMEX natural gas spot contract remains near the lower end of the technical trading range support level of $2.10 per million British thermal units (MMBtu). The new technical range resistance level is currently $2.30/MMBtu. From a technical viewpoint, the market remains in a short-term move toward the downside.
Long-Term Price Benchmark Trends
Estimates for a storage build this week call for another weak injection in the mid-70s, well below the five-year average of 99 billion cubic feet (Bcf), and below last years’ build of 126 Bcf. Total inventories show a surplus of 755 Bcf, or 36.5%, compared to last year, and a surplus of 37.4% compared to the five-year average.
Natural gas inventories are currently at 65% of the U.S. Energy Information Administration’s demonstrated maximum working capacity, compared to 47.7% capacity this time last year. The fact that storage capacity may not be enough to handle the projected volume of storage injections could result in prices declining to the point that production is further constrained. On the other hand, a strong summer cooling season, or an active hurricane season, could alleviate what may be a pending logistics problem during the injection season.
The slowing pace of production seems to be affecting the end-of-season storage trajectory, as many analysts feel that a storage glut will be avoided. Estimates for end-October storage levels are 4.1 trillion cubic feet, which is a healthy amount of gas in storage, but not an amount considered a glut.
James Moore, Ph.D., is CEO of the Energy Research Council (ERC). He has been CEO of several research companies, including TDC, a subsidiary of International Thomson; Highline Financial, a Thomson-Reuters company; and Mentis Corporation, which was acquired by Gartner Group. He has also served as Executive Director of The Global Futures Forum, an international think tank, and as Managing Director of Gartner Group’s Global Financial Services practice.
* ERC electricity price benchmarks are derived by: 1) aggregating daily matrix prices issued by many electricity suppliers across General Service tariff rate classes for each electric utility; 2) averaging each utility’s price benchmark together for a state-level benchmark; and 3) averaging state-level benchmarks across five business days to create weekly average price benchmarks, based on next month’s start date, for commercial customers with an annual usage of up to one million kWh. The high level of correlation between matrix and custom pricing makes ERC price benchmarks a reliable measure of how prices are trending, and the direction and velocity at which prices are changing week-over-week and month-over-month. This is similar to how the S&P and Dow measure the rate and direction of change in stock market prices over time.