Good Morning,
Like Bill Murray in Groundhog Day, I keep waking up each morning to a warmer and wetter outlook:
Even NP15 gets soaked by this current system, though Socal will, for the time being, escape its wrath:
Storms arrive via wind and that energy source is beginning to rebound from nothing to something.
About three weeks ago, just before Christmas, the reported renewables (BPA + ISO) hit a seasonal high of 10,000 aMW and this system will also bring a strong rally which will render our BOM outlook ever more bearish.
The big news is not the wetter weather but that yesterday the Corps released their initial Flood Control guidelines:
Note the drafts for January: Mica 1.6 maf, Arrow 1.7 maf, Lib 2.0 maf, and Duncan .085 maf. Those reservoirs are pulled even further in February but the majority of the water is taken out in January. Coulee escapes a draft until April whence it must draft about 30′ which is over 4 maf. All of this is based upon the Jan 1 water supply forecasts and we know those have fallen since that date:
Everywhere fell off but given the latest storm system all of these stations will rally off of the current forecast. Where this ends up on the official Feb 1 number is anyone’s guess though I’d be inclined to suggest the next draft will be smaller but not dramatically different than what is now projected.
So what’s it all mean in terms of your book? To answer that question we have to first see if the draft will actually happen, but if it does occur all of that drafted water is heading for Coulee. I’d expect Powerex just found themselves longer and may explain some of their aggressive selling of late:
Coulee has room to capture inflows as it is sitting at 1280 but that will fill quickly should the Canadians start pulling down their reservoirs. Once full, the Canadian draft renders the USA Columbia river system a run-of-river system.
I was bearish BOM and Prompt yesterday and am more bearish today. I was relatively bullish April light load a few days back and no longer have that sentiment and would immediately unwind that position given the four maf draft at Coulee. In fact, nothing looks bullish any longer and if I was a hedger. and had length. I’d unwind it; if I was a speculator I’d be short and getting shorter.
Enjoy the bal day,
Mike