Good Morning
Last post of this year and want to thank each of our clients for their support during Ansergy’s inaugural year. We eagerly look forward to 2016 and the many energy surprises which lay in store for all of us. One surprise has come early – the northwest cold front has grown a bit more:
Sadly, for you bulls or long utes, the cold reaches its zenith on New Years; had it been a few days later several northwest utes would possibly have set new highs – they might anyways. The real cold is east of the Cascades, as it typically occurs, but even Portland gets down to the frosty low 20s:
and Spokane approaches the nether world of negative temperatures:
The first cousin of cold weather is typically calm and windless days and this event is just such:
That chart is saying there is about 5k MW less reported renewables in the ISO and the northwest than last week. Ironically the renewable haircut may be having a larger impact on net demand than the incremental loads. The ISO LMP market is feeling it:
Especially SP and note the effect cold in the northwest has on the Palo ISO markets. The forward markets are responding in kind and leaving tire tracks on the backs of the persistent, and wrong, bears:
Who sold those 19s anyways? Who bought ’em besides me and my virtual length? Well if you did congrats and you might consider taking your well deserved profits as the old saying goes “buy the rumor, sell the fact” and the fact is today might be the last day to trade that cold. The weather forecast turns appreciably warmer a few days after the new year arrives, but let’s examine all the fundamentals.
The northwest water year remains robust despite being the largest El Nino on record though the current outlook is for at least ten days of dry:
Feel free to ignore those silly numbers in days 18-22, you might as well mortgage your house and buy lottery tickets. Don’t ignore the zero’s posted for ten straight days as those are real and really will come to fruition. So call today the high water mark for WY16:
and it’s a pretty high high but today is as high as it most likely will get for the year. Ten dry days is about 10% of the water year, that table above will be displaying much lower numbers on Jan 10. Call that bullish. Another bullish reality is the return of the DC on Jan 12, call that bullish too. Powerex has already filled the line south-bound so don’t count on their capacity to absorb the incremental exports to SP:
In sum the Mid-C outlook can only be considered bullish but that can change with another storm system, for now there is nothing in the horizon to slow the train down, except a change in thinking on flood control. That first hint of how the feds will manage this water year will be perhaps the single most important piece of news in all of January and expect that update during the second week of Jan and expect some level of drafting given the substantial snow pack. Call that bearish Q1 should it happen.
Enjoy the holiday, be safe, and see y’all in the new year.
Mike