Good morning,
The STP, as expected, comes out bearish BOM but surprisingly neutral the balance of the strip:
Yesterday’s 10 day forecast tipped the Portland prognosticator’s hand showing a big jump in the day on day forecast:
Surprisingly, and perhaps incorrectly, the Dec actually sustained a small cut (140 aMW). You should expect next week’s STP to push up both BOM and Dec, unless the weather quickly reverts back to dry, but the forecast isn’t dry, in fact it is wetter than yesterday:
Check out the storm on the 18th, where did that come from? Doesn’t matter where it came from, it’s where it will land that matters, and that is in the heart of Mid-C hydro production (see the forecasts for Boise, Pendleton, Spokane, and Kalispell).
But we digress, back to the STP, and this bearish BOM, though there is room for more bearishness, even 2014 had more BOM water:
Which suggests, further confirms, that next week’s BOM, and probably Dec, will show increases in hydro energy. In closing the daily plot is worth looking at:
A big spike which quickly tapers back to the last five week’s values suggesting that the RFC has not allowed Dec to realize any impact from the Nov storms, probably a mistake, given that reservoirs are being recharged, snow is accumulating, and the ground is becoming saturated with moisture.
Surprisingly the BOM did not crush our foreasted prices as much as I would have expected:
Because of where Mid-C is in the Nov stack. There is plenty of demand to keep gas on the margin, even with an additional 2000 MW of hydro. It would take catastrophic precip to get gas off the margin, something that is not going to happen:
But perhaps the biggest risk to BOM and Dec prices are not fundamentals, though those are bearishly bad, it is the new found length BPA”s Slice customers are wearing, and as mentioned above, I’d expect them to get longer:
So if you see the northwest utilities start slapping bids around today you now know the reason … BPA just exercised it’s slice put.
Outlook – Bearish!
Mike