Good Afternoon,
Been a crazy week for the Mid-C hydro outlook with both the Ansergy and the NWRFC’s flow forecasts swinging up and down off of the US Bureau of Reclamation’s drum gate maintenance work at Grand Coulee. The current outlook, from the Ansergy WECC Forecasts, are a shade more bearish than yesterday.
Ansergy’s WECC Price Forecasts
Saturday, Feb 13
Bal Month (Feb 12-29)
Check out the one week change at Mid-C: -$4.88, all driven by the maintenance at Grand Coulee. The rest of the hubs are off, mostly driven by declining natural gas prices. Mid-C is now a lot longer BOM and March but expected ISO imports are relatively unchanged as the lines were loaded before the drum gate-based changes were implemented.
March 2016
April 2016
Q2 2016
Q3 2016
Before diving into today’s fundamentals I wanted to share a confirmation of the drum gate project via the TMT Minutes:
For the time being we are modeling the project commencing March 15. Most likely the work will actually be done as the water year is growing, not diminishing (see Mary’s comments above).
I find it strange that we are not seeing more of a separation between the Jan-Jul and Apr-Sep. After all the NWRFC has put an additional 2000 aMW in Feb-Mar due to drum gate. I’d a thought that would jack Jan-Jul more than Apr-Sep, but that is not what the above table suggests.
Weather Forecast – Mid-C Composite
Expect Mid-C to be warm and wet for the next six days, then followed with dry and slightly cooler, though the calendar is working against bullish weather days at Mid-C as the evidenced by our 180 day demand forecast:
The slow grind of decaying demand has already begun and will continue for the next three months. There is still hope for an arctic blast but it is more hope than anything else, at least the 11-15 hold no promise for such fantasy. SoCal is starting to cool off after seeing temperatures in the high 80s:
Temperature Forecast – Burbank
Cooler outlook will lower demand and put downward pressure on SP but the fact the event occurred in mid-Feb should be acknowledged. The next heat wave may be 5-10 degrees warmer as the calendar slides into summer rendering us cautious SP bulls.
The River Forecast Center has a slightly, ever so slightly, more bullish 10 day outlook:
The backed of this plot is suggesting 500-1000 aMW less energy at the end of next week and provides the basis for a slightly less bearish STP next Monday. One indisuputable bullish turn of the screw is wind:
Wind Energy -WECC Actuals (BPA + ISO)
Except I’d call it bearish because it is hard to get much lower than what we realized this week. Looking further out I’d be inclined to cover June Mid-C shorts, either on or off peak, and would be taking outright length in the south (PV or SP) from May through Summer. Prices are cheap, so much bearish news has already been priced in. The recent heat wave in SoCal should be a wake up call to where things may go for later spring and summer.
Enjoy your weekend,
Mike