Good Morning,
There is an ever so slight hint of cooler weather in the northwest, though given it happens in days 11-15 there is an every high probability of cold weather NOT happening:
That Jan 26-Jan 30 period will definitely will stay on our radar screen but given the forecast also includes a fair amount of precip we doubt the event, as it currently is modeled, holds much hope for a big load event. Yet the fact that the forecast has dropped seven degrees, the first time we’ve seen a drop in a few weeks, is an event in and of itself.
Today we shall receive the STP update, probably later this afternoon; normally the forecast would have been released yesterday but given that day was MLK day the feds took a much needed break. Perhaps that extra day gave them time to reconsider their ultra-bullish Feb-March forecasts? Seems the 10 Day is suggesting another BOM bump which probably will spill into Feb:
That is a 1500 aMW increase in projected outflows but it is the same thing every week …. tight STP beyond day 14 with a subsequent revision upwards a week later. Given the big wet in the northwest that trend will/should continue. The latest Water Supply numbers don’t reflect much change in the April-Sep:
These are quite modest changes, perhaps because yesterday was a holiday; so modest they seem under-stated, at least from a snow perspective:
The snake basins are up 6% week on week yet the LWG water supply forecast is unchanged – huh? Above Coulee is up as well though just 2-3% higher. Note the BC stations are enjoying a healthy water year (except for the Peace which is a train wreck waiting to happen). By the way, those BC stations were just added yesterday and are a compilation of several snow stations mapped to the downstream dam and computed using our own internal 20 year averages.
Back to the water outlook … it seems to me that the official outlook will continue to push up for the remainder of this week and with normal precip, perhaps slightly higher than normal, it will continue that trend into next week. This is important to note as the Feb Flood Control guidelines will be set off of the Feb 1 water supply forecast which currently looks to be just under what was used in January:
So our best guess is Feb Flood Control will either be unchanged or slightly deeper drafts. Assuming those drafts are now priced in then our outlook for the Mid-C remains bearish Q2 but that hint of cold at the end of the month tempers our bearishness for Bom/Feb. The return of the DC this week further tempers that sentiment as does the recent renewables:
Most of that wind haircut from last week is coming out of Mid-C. Granted there is nothing to make us rabid bulls but there is plenty to make us less rabid bears (DC line, cooler weather, low prices). I’d be taking gains on those shorts we virtually laid on and be approaching flat bom/feb and wait out the weather. Of course if the front (cash) rallies so shall all the other periods however the certainty of a rally is low and not worth paying the bid/ask/brokerage to reverse the q2 shorts ….yet. Our price forecast for Mid-C reflects that sentiment:
There is not enough water to push the Mid-C out of gas until you get towards the end of May -then we could see single digits, probably will. Big drafts in April could change that, so could really warm March-April, not that we, or anyone else, knows what that weather then shall look like. For now I’d just take some front-end profits and keep the back short and watch the weather.
Mike