Market Commentary

WECC Update – SP Markets

Good Morning,

Today we’ll crawl the SP HL front-end curve out through Sep 2019. Our fundy takeaway was a bit bearish because of the lingering west coast heat, but soon that heat will be bullish, not bearish. Given the recent trends, we should start seeing cooling degree days in Feb. Overlaying that interesting weather outlook is the dark cloud of Socal Gas. Will the LDC finally send its crews out into the harsh desert and fix a broken pipe, one that blew up two and half years ago? Or will they stay in the smoke shack sipping coffee and munching donuts for another decade or so? That is the question de jour; we think they start fixing things.

Today’s Blog Fodder

In table order …………..

BOM’s really BOW, as in Bow Wow; it’s been a dog, still is a dog, and that weather forecast isn’t warm enough to trigger much cooling load. Doubt we see it tank either but have no compelling desire to be long or short.

Prompt staged a nice rally, both PP and HR, yet remains on the cheapish side of things. Given our tight water outlook up north, at MidC, and a slight chance of some CDDs, we’d buy this.

The roll has rallied hard, PP-wise, while the HR is cheap. We already said we’d buy Feb and pass on Jan and would pass on the roll, too.

March is cheap both HR and PP; each is beneath the forecast. I like cheap, who doesn’t ……..BUY

HR is cheap; the price isn’t so much. I’d be long both and forget about the roll.

April, unlike Feb and March, never sold off; if anything it rallied, which is odd because that is when the first piece of the Socal imports, 600 MMCF, should be restored. Let’s look at the roll.

The roll is near a contract high for PP and close with HR. Of course, weather is warmer in April than March, but our play would be gas and odds of “hot” in April are low. Plus, we potentially could see some bitter cold in March, both in the Northwest and Cal; but at neither in April. I’d short this roll.

May isn’t cheap, either. Those hefty Socal Citygate premiums linger in this bullet. To the roll for clarity …….

The roll is cheap, though the HR just went nuts and rallied. I guess the thinking here is that 600 MMCF of import capacity is restored in May but not in April. But it wouldn’t take that many CDDs to absorb the new gas, and what if the capacity doesn’t come back? This roll seems anomalous; we’d buy it.

This isn’t cheap, the heat rate was cheap a few weeks ago, it isn’t any longer, yet both PP and HR are beneath the forecast. To the roll…….

Both HR and PP sold off, but each remains rich. The odds of a restoration of import capacity are higher in June than May, but June will also be hotter and less likely to carry any melt-driven hydro.  I’d be more inclined to fade the recent sell-off and buy the roll.

This is the lottery ticket, the widow or hero maker. The hope of the longs is $40 Socal Citygate prices and the LMPs clear in the $300s for several days. Now is a great time to jump in if you honestly believe that could happen, prices haven’t been this low since October. Heat rates have NEVER been this cheap. That said, I’d be paranoid of the gas side of the equation. I guess the question to ask and answer is “Could SP blow up even if all its gas import capacity is restored? Could it be hot enough or enough outages or weak northwest hydro to drive high prices?” Of course, it could, but I wouldn’t go long just yet, the trend is down, and I see no cash event to change that, at least not in the next 14 days. PASS

The roll is cheaper but not cheap. Pass

Like July, I think there is more room for summer to sell down and wouldn’t want to be wearing that potential pain … PASS

Shyte, are those marks right? The PP and HR soared, and we’d short it.

Poor Man’s Summer, Sep is, and its even more comfortable to own today than ever. We’d own those heat rates all day long; remember, if Citygate goes back to normal so do heat rates and owning Sept at 11k sound cheap. BUY

Wow, the rolls are too cheap to meter …………….BUY

 

Ansergy Update – Part One of Two

Good Morning,

Paint drying, watching it that is, is what the mid-January WECC markets are like. Weather is stuck in a warm, dry pattern; all the action is to the east of us where it’s bitter cold. But this extended dry will impact our markets but, like paint drying, it may take a while.

NOAA gives LA 14 days of beautiful and sunny weather. No gas issues there, perhaps that is why Socal Citygate’s spot price settled beneath PG&E for the first time in recent memory?

Even as Sumas continues its free fall to $2.00, the spread against Citygate collapsed on Friday – most likely off of very weak demand. Another takeaway from the above table – note how tight all the basis are to one another. Contrast the current flat spreads to October and November.

That’s a dry 6-10 day, on Saturday it was a dry 6-14 day. Mostly, the WECC reverts to normal around day 10, which is far enough into the calendar to give us low confidence.  Fortunately, the WECC got hit pretty hard over the last week, and SWE anomalies rallied:

Ansergy’s MidC index is back to 88%, and the California indexes are well above 100%.  Those latter ensure an extended runoff, we just don’t know when, though given a warm bias we’d expect April and May to bear the brunt of the unregulated inflows.

BOM pulled back, rather sharply, but why wouldn’t it when the weather forecasts pulled back even more?  Now we can cover all of BOM with the 6-10 day and it is ugly.

NOAA 6-10 Day – Wednesday

.

That’s what we knew as of Thursday morning; then the outlooks just grew more bearish for WECC while more bullish for PJM and its brethren. Oh well, you’d expect the sell-off to continue in a thermal system, but the WECC has hydro, lots of it, and water is tight, or tightish. So not sure you see everything collapse.

Prompt didn’t pull back like BOM; I guess because the back of the forecast wasn’t as bearish and we have less confidence in it. One of the weather gurus on that Enelyst chat board got all hot and bothered over the 30 day, or maybe it was a 90 day, cold outlook. I could only laugh. Trade off of those extended forecasts if you are looking for a new career.

LMPs are weaker than not but more telling is the lack of spreads between any of them. Even Palo tightened up to SP.

Both Socal and PG&E are drawing hard on their storage, especially the latter. It’s almost like they know Socal will restore its import capacity and summer refills won’t be a problem. Just a guess, but Socal repairs remain the WECC’s biggest summer wildcard. At this point, if I were to bet, I’d guess they restore 600 MMCF by mid-April and another 400 MMCF by June. Should that come to fruition, we could see another significant selloff across the WECC. There are still massive Socal Citygate premiums embedded in every roll, outright, on/off, and location spread. All of those will dissipate, just like they did when the Sumas capacity was restored.

Adding to the Northwest’s woes are these big drafts at Jackson Prairie. Gas demand is soft, but now Puget has a new problem – too much gas. They husbanded the storage to prepare for a Winter Armageddon that never arrived; now they are puking it out to make room for the summer injection season.

The storage project is between 300 to 500 MMCF fuller today than any time in the last six years. Does that mean there will be 500 MMCF less room for injections this summer? That’s a fair amount of gas sloshing around the MidC trying to find a home and Sumas will be back to chasing $1.00 handles.

Not much to add to that chart, the arrows say it all. Loads are abysmal.

This report looks at changes in the weather forecast, todays versus three days earlier. The front is quite stable at all four traded hubs, but the back has San Jose and Portland warmer and Phoenix cooler. 

Gas noms for power plants are off in the ISO and up at the MidC; the latter us up because the Sumas power plants are back to running, they weren’t in Oct and Nov.

Gas outages in the ISO are up since the start of the new year; the late winter outage season has begun. Not that it matters, there is plenty of idle capacity when Burbank settles in the 70s.

Renewables are up in the ISO; they were down because it rained hard and cut the solar. The wind at the MidC increased but remains well below average.

Prices are up, week-on-week, at the MidC because hydro and wind are down, not because demand is up, it isn’t.  Check out those year-on-year hydro numbers (2nd table); crazy tight right now.

ISO’s loads are way off, year-on-year, and imports are up. I like these tables; they summarize the fundies in an easy to see perspective.

BPA cut power at Coulee, week-on-week. Yesterday’s average output was the lowest in weeks. Maybe the STP is right and Feb and March will be the tightest in years?

What Coulee giveth, lower mainstem taketh. Flows across the latter were down.

Inflows at the international border are well-below normal, in fact, all six guages above Coulee are below average. Worse, there isn’t any low-level snow to melt; nothing to fuel natural river flows in Feb and March.

Snow  Cover – Jan 20, 2019

Snow  Cover – Jan 20, 2018

Snow  Cover – Jan 20, 2017

You see the difference, especially against 2017 versus 2019. There just isn’t much to melt below 4000 feet which is the range that drives the season’s first freshet. This year, there may not be a “first freshet”; at least that is what appears to be driving the very tight STP Feb-March outlooks.

At least the Northwest reservoirs are mostly full; the biggest hole in the Columbia are at Mica, and we’ll argue its storage matters the least. That massive reservoir can hold multiple years of water, while everywhere else is on annual cycles that can’t vary. And besides, the swing in discharge at Mica is not very big, like around 15 kcfs.

Average peak discharge at Mica is about 18000; max discharge is maybe 30 kcfs, leaving around a 12kcfs swing. The Spokane River has more volatility than that which is why we suggest the hole at Mica is not going to be a major MidC driver.

All that rain has forced most of the primary storage projects in California to release water; we suspect some of that water is spilled given that the ISO’s hydro energy is not moving up.

It’s Monday, time to play the STP whack a mole game. Which month gets bumped, which gets cut?

Hard to see how the NWRFC could cut either Feb or March any more than they already did. If anything, they might raise both if the Corps elects to do more drumgate work this spring. Should that be the decision, then Coulee must be pulled to 1255′ by March 15 and we suspect there will be little to no flood control draft. So, if the STP doesn’t soon bump Feb and March, we can conclude there won’t be drumgate work.

As the Northwest gets longer, more energy flows northward. Flows into SP on the NOB are off and the AC remains derated.

Conclusions

Weather is bearish, but Northwest hydro is tight. It appears the plays are more in the backend of the water year than the front. Cash is not going to change much off of this forecast, but the dry weather makes the spring ever tighter. More on that in a post to follow.

Change Mid-C

This weekly report, Change, summarizes how the week that just ended compares to both last week, and the same week a year ago.  Through 1000 change records, we have filtered down to those that we found most relevant.

 

[render_email_report name=”Change – MidC” date=”2019-01-19″]

WECC Update – Part Two of Two

Good Morning,

Our fundy walk left us a shade bullish;  both from colder short-term weather and a tighter water year. Today, we’ll look at some Qs that jumped out of the APT table.

These are in no particular order.

Palo’s On|Off spread for Q3 has been tanking, more off of the HL falling than the LL rallying. Both PP and HR are now at or near the forecast values suggesting a possible buy. Our summer fear from length is a full return of Socal’s import capacity; should that happen, this spread will continue collapsing and if it doesn’t, going long here is like owning a summer call.

This is another On|Off; this one is at NP15 for Q4. Like the Palo, it has come off over the last couple of weeks. Sell it if you are bearish, we’re bullish and would buy.

Even the mighty SP15 Q3 has sold down, possibly off of the market expecting some increase in Socal’s import capacity.  Still, it is looking like a dry year and probably another hot one, after all, most of the recent years have been warmer than usual. Time to buy this? I’d be tempted.

The above plots are the year-on-year Q2 MidC roll; it’s trading negative (backward dated) because the market expects the nearer in Q to trade at a premium. That is a correct assumption given what we know about this water year (it’s dry) and what we don’t know about 2020. PASS.

The above is the same derivative but at SP15. That plunging heat rate caught our eye; this has fallen nearly 2000 BTUs in a week. It seems the market expects the Socal issues to be mostly resolved by next year and it also seems this consensus was just recently reached. We checked Socal’s maintenance schedule and didn’t take note of any news, but someone out there seems to know something.

Here’s the locational spread between SP and MidC for Q3 and the market has sold this down, too. It is hard to disagree with that direction given the ever-drying out in the Northwest and the chance that SP’s gas import capacity gets bumped a B.

This one is cheap, both HR and PP. The fear is a blow-out summer that doesn’t impact Q4, which it won’t, it rarely ever does. If you were bearish summer, this would be a buy, but we’re more bullish than bearish.

Lots of bearish charts but here’s one with a big rally, both HR and PP – the Q1|Q4 roll at NP. I’m not sure what the thinking here is, aside from buying contract lows. I’d be inclined to fade the rally and sell it.

The SP Q4|Q3 roll has also staged its own mini-rally; all of this is connected, the market is growing pessimistic on big summer prices, probably from diminishing gas concerns.

The Q3|Q2 NP roll has tanked, too. All of these big moves began a few weeks earlier, at the start of the New Year. I like buying this since you get long summer at spring’s expense. I also like being short the Q2 as California will have a runoff this year, all of that will come down in Q2.

WECC Update – Part One of Two

Good Morning,

Fundies are growing tighter; the temps are dropping and the rain is evaporating and the markets staged a small rally, both gas and power.

Bom bounced off of six-month lows but seems to have stalled; we think there is room to continue moving up.

Prompt rallied harder and didn’t take a pause; we think it keeps going up off of falling temperatures and an overall drying out.

The Socal Citygate | Sumas spread tightened up nearly a $1.00; both are up though Sumas has rallied almost $1.50 in a week. Some of Sumas rally might be explained by wildly fluctuating inflows at the border:

Tuesday’s flows hit a 30-day low, but that was short-lived as yesterday’s exceeded that 30-day average. Most of these oscillations were scheduled; Enbridge is testing pressures in expectation of a return to full pressure soon.

While the east coast has turned bitter cold the west is colder, especially outside of the ISO. The Cal coastal cities are clinging to above average, but as we discussed on Monday, the cold has shifted west and grown in intensity; this isn’t “cold” per se but is much cooler than Monday’s outlook and way colder than last week’s.

NOAA 8 to 14 Day – Jan 9

The markets should have rallied off of that implied change in demand, but there is another fundy that is taking the WECC on a more bullish turn – that is the hydro outlook.

All of the west is bone dry; that’s what high-pressure systems do, they block out the storms. This outlook takes us through what’s left of January and gets us also past the half-way mark in the water year.

On average, by Feb 1, we’ve realized 52% of our precip for the snow year; Ansergy defines April 15 as the end of the snow year. Some would argue it is earlier than that since all Flood Control drafts are in place by the end of March.

The average of all the gauges at MidC are now at 80% of normal, as of yesterday, having dropped 10% in a moderately wet week; should NOAA’s forecast hold, we’ll be sporting a 70 handle with half the year over. Dry years tend to drive early runoffs that are short-lived; they also are of shorter duration with little draft.

If you assume a water supply in the low 80s or high 70s, you can plan on little or no draft at Coulee. Three of the four design years had no draft; the Coulee target was over 1280′, a higher elevation than today. That’s interesting since it means very little regulated water in Feb-April and don’t expect any low-elevation snowmelt surges; there isn’t low-level snow.

Though we aren’t at a low 80 yet, the NWRFC has the Apr-Aug TDA at 90% as of today, but this very dry forecast during a period that is typically very wet will pull down that number. Point of all this snow chat is that the outlook is growing more bullish with every dry day.

Loads were up at three of the four hubs, all but Palo; the forecast for temperatures will drive next week’s loads higher.

Another source of bullishness has been the weak renewables, both wind and solar. The Northwest hasn’t had any wind energy for nearly a week and the ISO solar tanked over the last couple of days; of course, cash would tighten.

Coulee’s discharge has fallen, week-on-week.

Several of the BC Hydro stations are falling; most are below normal.

California is realizing a bit different scenario; regulated discharge at several of the dams soared the last couple of days.

Meanwhile, the NWRFC’s Ten-Day outlook is once again all over the map. Big cuts in Bal week and a rally of sorts next week; perhaps that latter is driven by BPA’s expectation of higher loads?

The Northern Intertie flowed energy into the MidC for the last four days, but today its back to importing into Canada. The AC remains derated as does the IPP line.

Conclusions

We were bullish last week, we were bullish on Monday and looked like we got paid. Usually, I’d take profits, but there is nothing in this outlook that isn’t bullish, we’d stay long the front, both the ISO and the outside hubs.

Mid Week Update

Good morning,

 

NOAA Forecast Images

Winter is making a gradual move back into the Northwest over the next two weeks, particularly in the back-end of the forecast.  California remains exempt for most of the next two weeks as should chart out above normal for most areas, especially those closer to the coast.

Precipitation Forecast

Most of the West is projecting a bone-dry forecast, at least relatively dry considering it’s January.  Don’t expect significant snowfall in the Cascades or anywhere in California.  Western Montana could be exempted from this forecast, though it remains on the margin of dry/wet.

LMP Spreads

SP-PV DA prices continue to show the most congestion this week as the two hubs have varied between $10-$20 for most of this week.  SP-NP is much tighter with NP priced one to two dollars more during most peaks.

Futures

Crude climbed nearly a dollar higher yesterday and isn’t showing any signs of slowing down soon after finishing at $52.33.

Gas shed $0.06 yesterday to finish at $3.22 and reversing the sharp climb that was started on the 10th (at $2.98).

Natural Gas – Term

SP15 has dropped more than $1.50 over the last week from its February price.  Mid-C is now just $0.20 from its pre-explosion price.

WECC Gas Demand

SP-15 gas demand sunk 360,000 MMCF yesterday, its largest single-day decline since December.  Palo saw demand going the opposite direction following a 140,000 MMCF climb day-on-day.

Gas Storage

Jackson Prairie storage has run in withdrawal territory every day since the 10th, including yesterday’s 361 MMCF deficit (though that’s less than the 580 MMCF withdrawal we saw on the 14th).

Mist is still injecting after adding 66 MMCF yesterday.  We’ve seen injections, or at least no withdrawals, every day since Nov 29th.

Hydro

 

PNW Reservoirs

Mica is still setting new 10-year lows and has been since July, though it’s worth noting yesterday’s elevation was only a foot off from last year’s mark while remaining 20′ from average.

Week-on-Week Snow Anomaly

Many stations sit in the position that could allow a large storm to push them into the normal category, but for now, much of the west fall below 90%, or even 75% in the Central to Southern Cascades.  Montana and Idaho lost ground on average over the past week without new snowfall.

Also worth noting the lack of low-level snowpack that we’d usually see at this time.  Early season melts may not have much of an effect this year.

Snow Depth Summary

11 stations lost snowpack across the past seven days, but none more than Bonneville and its 0.82″.  The Dalles and John Day saw 0.59″ and 0.46″ melt off their totals as well.  Not a good week for snow along the Columbia Gorge.

On the flip side of that equation, we saw Flathead, Kootenai, and Cark Fork all notch at least 0.81″ week-on-week.  That also means not a single station managed more 1.00″ of snow.

Snow Depth Chart

Most of Clark Fork’s snowfall over the past came within the first few days as the station sat mostly flat since the 10th.  Despite the 3rd-most snow of the week, Clark Fork remains 2″ below average and trails last year’s totals by nearly 3.5″.

Water Supply Charts

This is a peek at the difference between Ansergy and the RFC water supply estimates.  We are seeing even more separation between the RFC and Ansergy forecast for Grand Coulee Apr-Sep.

NP Snowpack Anomaly by Station

Last week showed 9 of 36 stations at or above normal, but this week brings just 3  —  Independence Camp, Buckskin Lower, and Css Lab (two of which are on the Truckee River).  Not a good trend for snowpack in NP, especially on the Klamath River where Taylor Butte is reporting below 50% of normal.

 

Demand

 

Mid-C Demand

Seattle will push north of normal for nearly hour from today until the 21st and will reach as high as 51 on the 17th, seven degrees above normal.  Tonight’s low of 36 will set the floor for the remainder of the forecast.

Watch Portland late next week as it projects a high of 55 on the 23rd, potentially 10 degrees above normal.

Loads climbed 200 MW in Mid-C yesterday as the hub sat was blanketed in cooler weather, especially overnight where demand jumped 700 MW day-on-day.

NP 15 Demand

NP peak demand saw small day-on-day growth yesterday but was mostly flat in the week-on-week comparison.  Overnight loads increased 250 MW day-on-day, however.

San Jose isn’t breaking records in daily highs as most day sit at or a couple degrees below normal, but overnight temps are forecasting as high as 52 by the 17th, equal to eight degrees above normal.  note the 23rd’s high of 67, also at eight degrees above normal.

SP-15 Demand

SP peak demand fell just more than 600 MW by mid-day though overnight loads managed a 500 MW increase.  Week-on-week loads were up more than 500 MW.

Cool temps over the next couple days will eventually lead into highs of 69 for both the 19th and 20th, as well as a return to 70’s on the 23rd.  Highs won’t reach normal until then, but overnight lows might stay at or above normal for the foreseeable future.

PV Demand

Next week is maintaining a forecast of cooler temps as high fall 5+ degrees below normal in Phoenix.  The rest of this week is marked by average highs and lows in the low-40’s over the weekend.

 

Fundamentals

 

Nuke Status

All six nukes remain generating at 100% capacity though CGS dipped to 99% momentarily on the 13th.

Renewables

SP-15 solar fell to just 1,333 MW on Monday and reached just 2,400 on Saturday, both among the lowest generation days of the year.  Consistent 5,000+ MW days are not dependable as of late.

Mid-C wind is dependable if you are dependent upon sub-500 MW generation, at least as of this week.  mid-C hasn’t seen wind top out above 450 MW since the 8th.

ISO Gas Outages

ISO gas outages were mostly flat yesterday after seeing just 19 MW return online.  Outages have hovered around 3,000 MW for the past three days.

 

Transmission

 

BPA TTC

While last week showed COI as unchanged through the forecast, this week differs in across every hour.  Note the drop to 2,100 MW on the 18th, and the 300 MW increase on the 23rd.  All other hours are spent 50 MW higher than last week’s projection.

NOB remains unchanged at 3,100 MW.

 

 

 

Have a great day,

 

William

STP Update

Good Morning,

 

The following reports reflect the energy impact of the most recent NWRFC STP.

 

Monthly

Energy Scorecard:

  • January – Down 1,165 aMW
  • February – Down 741 aMW
  • March – Down 750 aMW
  • April – Up 1,046 aMW

January saw its gains from last week more than erased as the forecast did an about face while erasing 1,165 aMW from this week’s projections.  The cuts didn’t stop there.  February dropped 741, its largest move in either directions in weeks, while March plummeted 750, leaving the month with its smallest forecast in several updates.  April was the outlier with a 1,046 aMW addition and now sits nearly 4,000 aMW higher than it did four weeks ago.

Daily

January sees its largest week-on-week difference on the 20th where 2,700 aMW separates this week from last.  That changes to a positive differential for the 23rd and the 24th, but again falls behind through the end of February.  March begins the month in a neutral position then sees the difference extend to 1,200 aMW through mid-April, after which point this week’s forecast was increased by as much as 3,400 by April 30th.

Year on Year

February and March continue to play the role of outliers as each place in the bottom stack compared to the rest of the century.  January shows the smallest difference between the highest year and 2019, albeit that still comes in with a delta of 7,200 aMW (when compared to 2011).

 

William

WECC Update – Part Two of Two

Good Morning,

We left the fundies bearish in the front but it is all relative to not just supply and demand but also price. Today we’ll examine the MidC curve through September, just onpeak; one of these days we’ll look at the off but today isn’t one of those days. On Thursday, we’ll do SP15.

As usual, we’ll work off of the APT tables; this one was filtered for MidC months, HL, and outrights and rolls.

We’ll present in table order, starting with BOM.

First, a word on the forecast. It is overly bullish in my opinion and driven by a tight hydro forecast which is driven by an insanely tight STP forecast. We aren’t willing to abandon the STP, but just want to point out why the forecast is so strong. The dilemma of using STP or Ansergy’s forecast is historically an ongoing debate. Since the market uses STP, we elect to do the same.

Caveats aside, BOM is cheap historically for both Power Price (PP) and Heat Rate (HR). Fundies are bad so it should be cheap and there is more gas to be added at Sumas, though not much more. Still, this is cheap, and the market concurred on Friday. With a dearth of realized wind (both ISO and BPA) over the weekend we might see cash firm; if so, owning this might be like a cheap call, but doubt it rallies much, if at all. Still, at these current levels, I’d own it, like one piece at best.

Prompt is the same chart and the same fundies, mostly. One solid bullish fundy is that it has been warm in the forecasts for two weeks. What is the opposite of warm? Cold, and weather seems to oscillate in weekly cycles; now that NOAA has painted the mid-west and east cold, perhaps that system slides west as it has in the last two cold events? At these cheap levels, a long position might pay. If you’re willing to eat a few bucks, you can own the cheap call. Plus, we like that there will be little draft and no low-elevation snowmelt. LONG

The roll is richish PP and cheapish HR. The forecast prefers the Prompt over the BOM, but that’s because of how the NWRFC sees it in their STP.

Last week’s forecast put 1800 aMW more water in Jan than Feb, no wonder the model prefers the latter. But what strikes me, even more, is when you compare the Feb to prior years:

They have it as one of the lowest Febs on record, but the SWE anomalies don’t support that, nor does the 6-14 day forecast. The risk of going long off their forecast is they change their forecast, and the 8-week trend has been to jack the front and keep the back tight. But, we’re long both BOM and Prompt so will ignore the roll and its Feb bias.

Ignore the forecast; it is driven by STP which is 12,000 aMW lower than last year’s forecast for the same week:

12000 MWs! Compare this year to the previous four-year average the delta is still around 7000 MWs. We’ve caveated our forecast enough, let’s focus on the market, and it is cheap, way cheaper than modeled by the NWRFC. What if the feds are right? What if this is the third tightest March in the last 20 years? Long ain’t wrong until it is. BUY

The forecast heat rate on the roll is plunging while the market is soaring and is now approaching contract highs. If there will be a cold-induced MidC rally it will more likely happen in Feb than March; if there is a catastrophic early melt, it will more likely happen in March than Feb. If the Corps orders drum gate work the draft will be in late Feb and early March, not early Feb. SHORT this roll.

April isn’t cheap; it is just cheaper. If you get long Bom and Prompt, I’d be nervous about being too long anywhere else. We know nothing about the timing of melt, though we do know there will be minimal April draft and same is true for low-level snowmelt. If I had no other position, I’d own this too.

The roll is priced at historical average levels, though the forecast is massively biased towards the March. Trading the roll given our directions in the outrights would just clutter up the book…PASS

The market is starting to like the May, that’s a nice rally over the last week. It is too early to trade timing, and there aren’t prominent anomalies here … PASS

A low draft means an equally low refill. If spring is cold, any melt will be deferred into May-June and April might be the play. That’s what the forecast is thinking; we are leaning that way, too.

The market sold down while the SWE anomalies plummetted, just the opposite of what should have happened. The Market-Forecast delta is now at a four-month low, that is a buy signal. Plus, I like the Socal Citygate call option embedded in long June MidC. If water is tight and gas is on the margin, which it most likely will be, and Citygate blows up because Burbank hits 100, and the pipe fixes aren’t in place – lots of ifs, right? – this is a must own.

Now the market is liking the May more than the June, relatively speaking, and we disagree, somewhat. At these new levels, I’d buy this.

July hasn’t budged, much, while the rest of the MidC curve sold down. Let’s look at the roll before drawing our conclusions.

Not cheap in HR or PP. The problem with selling this is it’s a dry year, and both might be tight. Shorting would leave you exposed to a hot July, though if Socal fixes its problems in April, like they claim they’ll do, any embedded Citygate blowout premiums will melt away as those Westcoast Pipeline ones so recently did.

August isn’t cheap, it is rich, in every sense of the word. Too far out in the curve to care about in mid-January. Pass.

I do care about this in a dry year. The chances of snow-melt in July are low meaning the two bullets should trade closer to flat; this roll is rich HR and PP, and we’d short it.

Sep’s slipped and priced more reasonably than not. PASS

WECC Update – Part One of Two

Good Morning,

It is nice to be back on a regular schedule, sometimes. The markets are back on schedule, very bearish in Winter with hopes of screaming high summer prices. Right now, we only see weakness, though the front of the curve found a bottom late last week after a torrid four-week slide:

Not much of a bottom, but after the Holiday Selloff it seems significant. That was an epic bear market, and much of the reversal was driven by an early restoration of Westcoast’s pipeline operational capacity. Here is are the posts for imports into Huntingdon from last year and the most recent.

January 1, 2018

January 15, 2019

Last year, the Huntingdon Area delivery capacity was just 162 GJ higher than today; in other words, the Westcoast debacle is one for the history books.

The spot gas markets reflect the overall weakness; Socal Citygate is off $3.00 in ten days, and now PG&E Citygate is trading just $0.80 beneath.

The west’s gas demand is off hard in the Southwest and just weak everywhere else, driven by warm and wet weather – both realized and projected.

Sunday’s NOAA made a bullish turn for the mid-west and east coasts; the load-center WECC remains mired in above average temperatures, though this forecast was cooler than Friday or Saturday’s.

It isn’t as wet, either. California goes dry while the Northwest stays above normal through the 14-day outlook, though Sunday’s forecast was dryer for both than Friday’s.  But warm only means snow in the higher elevation which leaves the lower levels snowless in January. A few years earlier we wrote of low-level  snow, and its big impact on Feb March flows; this year is just the opposite, very little low-level snow, which is the first to melt, all of which suggests weaker natural river flows in March and April since it takes much warmer temperatures to melt the higher elevation snowpack. Toss in a very low draft, and maybe there is a sleeper buy out there?

Jackson Prairie is finally pulling gas and seems to be working with Mist. Where Mist drew down its gas throughout the Westcoast pipeline constraints, Jackson did nothing. Now it seems the operators are pulling gas, even when it isn’t needed. Call it gas lending, JP draws, and Mist fills, but doubt Mist needs to put much more back in, not given current weather outlooks.

Aside from weak overall prices, the only thing that jumps out of these four plots is the massive Palo congestion to SP — not seeing any of that at COB or NOB, or congestion pricing between SP and NP. Not surprised at the latter, not given the $3.00 collapse in the two citygate cash spreads.

Power loads are off, except at MidC which saw a slight bump, week-on-week. A rally off of a very warm day last week. Yesterday, in Seattle, it was sunny and warm, one could have played a round of golf.

We know it is warm per NOAA, here is the hourly version. The forecasts in Burbank grew a shade cooler in days 7-10, warmer at San Jose, colder in Phoenix and warmer in Portland. Nowhere is it cold, no sign of a demand-driven rally.

It is almost the middle of the month and time for a degree day recap, month-to-date. I would have guessed all cities were behind average and would be wrong; instead, half the stations have positive anomalies, half negative. The south positive, the north negative.

SP15’s gas noms are off, NP’s sideways as is Palo’s, and the MidC’s have rallied but only because the I-5 turbines are now burning that cheap Sumas gas.

NP and MidC were becalmed the last few days, and the ISO’s solar has mostly recovered from the rain which pounded that fair state.

The top two tables summarize the MidC on a week-on-week basis while the bottom two are the same, but year-on-year. Both hydro and thermal are up versus three weeks earlier yet each is lower when compared to 2017 or 2018.

A similar report, this is for the ISO. The top table is the year-on-year, and the bottom is the week-on-week. The dashboard has the LL if you want to see it. Loads and thermal are off when compared to any of the previous six years, while imports are up; hydro is up compared to the 2013-15 periods and off slightly from 2017-18.

California’s water supply is up in the north and down in the south; the latest storms had a northerly bias. Still, the state is in an average water year which is anormal given the ten-year drought and suggests sometime between April and June a runoff-driven surge of hydro will be realized, and it won’t be just a few days.

The MidC SWE index has fallen 13% in two weeks; Idaho’s is off 5%, and now the Spud State sits at a scanty 75%.

DIscharge at Coulee is up and camped within the historical range:

After several wet years, the MidC is about 10% behind 2017-18 and lends a bullish feel for how the runoff may play out.

Discharge below Williston (Peace) is up and not sure why? BC loads are sideways to low and the ute is not exporting to the USA.

The storage (water) outlook has brightened, the MidC’s aggregate reservoirs are converging back to normal after lagging as much as a MAF; BC’s remain below average and California is above.

Today is the STP and we look to the 10-day for a tell and we get none; expect another random forecast. The front of Friday’s 10-day is bearish and seems it’s a case of render to Paul to pay Peter.

A few tweaks to the COB TTC; both uprates.

The Northern Intertie has grown dormant, nothing flow north or south. The DC has been full but is off, week-on-week; so is the COB but that’s because of the TTC derates. The IPP line is amidst a big derate rendering PacEast long.

Conclusions

Nothing bullish except cheap term prices. Given a bounce (dead cat?) on Friday, perhaps it is a sign to go long? Hydro-wise we’d be long-biased, even in the ISO, but we’re months away from seeing melt-driven streamflows. Now it is all about regulation and timing, so we fall back to the tried and true – fade anomalies. More on that in the next post.

Change Mid-C

This weekly report, Change, summarizes how the week that just ended compares to both last week, and the same week a year ago.  Through 1000 change records, we have filtered down to those that we found most relevant.

 

[render_email_report name=”Change – MidC” date=”2019-01-12″]