Good Morning,
The Mid-C outlook, shorter term, is a touch more bearish this morning as it is a touch wetter in the outlook than it was yesterday. Forget Seattle and Portland wet, think Boise and Spokane wet:
Mid-C temps (load-weighted) are a touch higher and precip is the same but what is bearish is that much of this storm system makes it across the Cascades.
Boise (aka Snake River)
That is a rather bold forecast on the 15th – nearly an inch – and I’d discount it, but still Boise most likely will get an inch total out of the storm. Spokane also gets wet:
Spokane (aka Upper Columbia)
Likewise, nearly an inch in total precip out of the current storm system; an inch for a city that gets less than twenty on average. Most interesting, at least to me, is that the dry spell is broken by a significant storm system. The timing, right before the Corps sets its first Flood Control regs, is equally important.
Most of the Upper Columbia basin water supply forecasts are in the mid 80s, this system may push them into the 90s which should trigger a decent draft. If there is a draft, say 30-40′ in Coulee, expect Feb-Mar to bear the brunt of the regulated flows and expect the NWRFC to massively reverse its overly-bullish STP forecast.
Granted those are a lot of ifs, buts, and maybes in these statements but anyone who says anything with absolute certainty about the current water year IS making a mistake. Yet we must do something or we look like we are doing nothing, though nothing may be exactly what we should be doing. Yesterday I talked of Feb Mid-C heavy, let’s talk some more about that:
I was reluctant to put anything on there, but said if I must I’d buy it off of the return of the DC. Today I have more conviction – but from the short side, driven by the re-confirmed northwest precip. What we know is that the northwest will increase its hydro production over the next ten days, that is a fact. And we know that snow pack will build, again, another fact. What we don’t know is if the Mid-C will get cold, like real cold, which is the only thing that can save Feb. I’m not going to bet on something that isn’t yet in the cards; bet on what you know. Put me down as short Feb Mid-C until you hear otherwise.
I like to stay balanced so where to find some length? How about Feb Palo?
Outage season has begun and yesterday it sold down to the mid 22s and reached parity with the forecast; today I’d be a buyer, more to hedge against the Mid-C short. Alternatively you can do this against SP or NP for the same affect.
Another way to get a similar position is to do the Mid-C Mar-Feb roll:
The roll has settled Mar over ($3.70) in the recent past and it’s now trading at the 60 day low (Feb over). If Jan cash gets mushy, and it will, Feb is going to get spanked, and it will, but Prompt+1 is always less elastic to cash. Do I love the trade – NO! But I think its worth a buck or two and, for the sake of looking busy, I’d put it on.
Enjoy the rest of your day,
Mike