Good Morning,
The outlook for Mid-C is for slightly dryer in days 1-5 with hints of a new storm in days 6-10. Temp-wise it’s still warmer than a bull would like; really its just normal temps. The rest of the WECC is normal as well, though NP15 enjoys more precip but nothing epically El-Ninoish.
Mid-C
That precip in days 6-10 is interesting and probably has an equal chance of not being realized, however, if it does come to fruition it arrives in front of the Feb 1 Official Water Supply. Important because Feb Flood Control Drafts will be set off of that Feb 1 number. We will be watching to see if that storm persists over the next few days as it is currently modeled to reach the production-rich mountains in the east.
Loads are just normal, perhaps a touch more bullish than earlier this week, but well off the highs from the start of the month:
Northwest wind is abating from early this week. Take note of the light load hours on the 19th – massive price crushing energy:
Don’t expect to see that shape this weekend, the outlook is for a bit calmer, at least for the next few days:
Mid-C Hourly Wind Speed Forecast
Something is astir in the NWRFC’s 10 day flow forecasts – like more water on the backend, suggesting another bearish front-end STP for next Monday, but what else is new, they have been playing that hand for the last month or two:
Jan 28 is projected to be nearly a 2000 MW bump which suggests the Feb is due for a much needed upward revision – time will tell but that is what I’d expect for next week’s STP. While on the subject of the NWRFC let’s check out the most recent water supply forecasts:
This table was sorted by week-on-week change, descending. Lots of upward revisions, nothing lower equals bearish, but we already knew that. What is relevant here, and irreversible, is the number which will appear on Feb 1 as that will dictate any changes to the 2016 flood control drafts. Irreversible because once the water is drafted its gone for this year, so if Feb-April end up bone dry, like a good El Nino should, the cat is out of the bag. That very same cat escaped that same bag in 2000 and triggered the energy crisis – not saying it’s deja vu all over again but am saying no one knows what this water year will eventually become – though we are pretty confident it won’t be a dry one.
As things stand now you should expect single digit on-peak prices sometime this Spring with June being the most likely month:
Mid-C Daily On-Peak Price Forecast
In that early June period we see, in our price forecast, hints of single digits. You see it more clearly in the off-peak:
Mid-C Daily Off-Peak Price Forecast
This year, as it now stands, is not a big water year and the peak runoff will be of relatively short duration; short if we have normal temperatures. Note in both charts the relatively stability of April prices – stable because there is not enough water to knock all the coal off margin, even after the NWRFC’s massive STP revision this week. The only thing that will crush the April into single digits will be a warm March and April. Then we will see the Corps draft the runoff and you should be buying May and June and Q3 and Q4, but don’t count on warm March and April, it doesn’t happen often (it did in 2000!).
So what do we love and hate today? Not much has changed from our outlook earlier this week – indifferent to slightly bearish in the front and bearish on Q2 and Q3. Q3 because as the water year builds it spills into July (note the forecasted on peak price gap in late June). Get this water year above 100% and July could get smoked, but for now its probably just a shade over-priced.
I’d buy the March and sell the Feb in the mid fours for a couple of reasons. If we are right, and the RFC bumps the front in the STP, the Slice guys are going to be sellers of Feb next week. The RFC has been reluctant to move off of its numbers beyond two weeks, we don’t think they will next week either. Also, Feb will be BOM soon and will bear the brunt of bearish cash, the March a bit more resilient to cash.
Likewise I’d play the Apr-Mar by selling the April and buying the March. Any upward revision to the Feb 1 water supply forecast will force a larger April draft and will have much less impact on March as the above Coulee revised drafts will all be pushed mostly into Feb. This trade is just a lotto ticket on some cold weather in Feb but doubt you could lose much on it.
Mike