Good Morning,
The big news this Monday is the return of the DC, not that it should be news, however it is the single most material event in our morning review:
And recall last year’s maintenance and how many times it was pushed back whereas this year there were no pushbacks, the line was scheduled to return on the 30th and on the 30th it did return. BPA even tested some StoN flows and those worked, not that they really needed to test that direction, energy flows that direction once in a Leap Year’s blue moon.
Before looking at the hubs, let’s take a look at the EIM:
Yesterday realized a three hour string of dysfunction peaking with $1000 prices for a tick or two, but it was the seven ticks north of $100 over the HE10 to 13 which caught our eye. Today is opening weaker than yesterday:
Is that the DC energy causing the weak open, or is it just the gencos ramping up for the biz days? Or is it just noise generated from a random market? Probably the latter.
The LMPs for today are off from last week:
One would have thought they would be off even more given the return of the DC, massive Cal rain over the weekend, and spot gas markets that are falling off the cliff:
Socal and Stanfield were both off $0.24/mmbtu, that is 10% and bodes not well for BOM length. We don’t see anything to change that bearish gas sentiment – the west is wet, temperatures are expected above normal most everywhere, and outages are just normal. Though that wetness is less wet in the ten-day outlook:
Both NP and Mid-C are below normals but they both need a lot more dry days before the water year gets close to normal.
Mid-C
Composite Hub-Level Temperature Forecast
Temperatures generally are warmer than normal but that normal is downward sloping meaning loads will rally through the month, and if there should be any real cold that load will spike dramatically. The precip outlook is not wet, but its not bone-dry, either, rendering the water oulook modestly bullish but that is outlook is mostly washed out by the water hangover from October’s record realized rains.
Gas Noms remain relatively weak as compared to last year, not surprising given the warm and wet weather of lake.
Today is STP Monday and we like using the 10 Day vs STP to get a sense of where that important forecast will wind up:
Energy is generally up for most of the ten days, when compared to last week’s STP, which usually indicates a front-end rally in the upcoming STP. Given above normal realized precip last week, and slightly below normal looking ahead, we’d surmise that BOM is raised a 200-300 aMW, Dec a bit less, and Jan-Feb should remain unchanged.
Morning loads at the hub are up, week one week, as weather has turned cooler, not cold:
The forward outlook for loads is up, no surprise there given winter is coming:
But before lifting offers it is a good idea to look at “NET Demand“:
In this plot we see a much lower slope, in fact it is flat for the next couple of weeks, as net demand = Demand – Hydro – Renewables, and the hydro outlook shows more energy over the next couple of weeks. Price follows Net Demand:
We were “virtually” long Nov Mid-C last week and will remain such today given little downside, albeit same for upside, but the up can change with some cooler weather.
We mentioned the DC is back and so are BC’s selling ways:
The smaller rivers, those more like run-of-river, in BC are also up:
The Cheakamus is up 300%, week on week, and the Slocan has doubled. BC Hydro is long, like the Mid-C, given weak loads and very strong precip and flows, and will be looking for any decent bids to pound, maybe even indecent bids?
NP15
Loads are up a bit, 500 MW, week one week.
And the gas price is more resilient at PG&E Citygate than any other hub, having dropped only $0.05 versus $0.20 at Socal and Stanfield. The northern part of the state was pounded with more rain over the weekend
The Merced is flowing 10X more than a week ago, most rivers are up except the regulated Pit and Shasta. Some say hydro doesn’t matter in Cal, we disagree, there is more energy in the state today than there was on Thursday and the reservoirs have more water in them than they did last week. It is bearish, plain and simple, but just not as material as the northwest.
Calpine’s Russel City is a new outage, so is La Paloma #1, both are low heat rate units which will put upward pressure on prices. Gas Noms at NP remain well below last year’s levels:
While weather continues bearish:
With the AC projected to return to full capacity soon, strong streamflows, and weak demand it is hard to get too excited about NP15, but it is all relative. And relatively speaking the outlook for NP is bearish:
We have the hub drifting sideways for the next two weeks then moving up as heating loads rally. For now, it is merely in a holding pattern.
SP15
Loads are up a bit, 1400 MW, week one week.
That number caught us by surprise but really just reflects the very weak loads last Sunday. The weather outlook shows a return to warmer weather which will kick out some A/C load, not much, but more than what we’ve seen the last few days.
The incremental load helps but is more than off-set by an increase in imports (from Mid-C via the DC) and the price outlook for the next several weeks is flat:
We did note a surge in wind energy yesterday but the outlook for the rest of the week is just normal.
Palo
Loads are up slightly:
Note the massive deltas to last year’s loads – Phoenix has been on a long run of above normal temperatures. And weather continues to cool, though stays above normal for the next two weeks:
That cooling trend will drive loads down, back to 2015 levels, over the next couple of weeks:
At about the time loads hit bottom the nuke should be coming out of its refueling, but the price forecast is resilient, except for a couple dips, it holds steady around $24.00:
Conclusions
- NOV
- Mid-C
- Staying long off of low market prices, the pain has been realized, a modest drying trend, and the return of the DC. The lottery ticket here is cold weather, there has been none, if there ever is any the hub will gap 25-50%. The downside is another massive storm, and given that the ground is now saturated, most precip will end up passing through the turbines. We see neither cold nor wet weather in the near-term horizon so this length is more about “looking busy” than any strong convictions; we don’t have those.
- SP15
- We’d buy back the shorts off of the new a/c load we see for this week but really don’t have a bullish sentiment for SP. The one saving grace for the hub would be a lifting of the injection ban on Aliso. Should that happen we’d buy the whole strip.
- Palo
- Nothing to like and will short just to hedge the Mid-C length.
- Mid-C