Good Morning,
The collapse of the spot gas market continues to create a hang over for the power market:
PG&E is off $0.60/mmbtu, contrast that with Stanfield off a more modest $0.40, all of which has to put some downward pressure on the ISO-Northwest power spreads. Casting further clouds on bom bullishness are the river flows in the northwest, these remain strong but natural river flows are coming off:
Four of our five “side flow indexes” are down, week on week, and that trend is expected to continue for the next ten days; projected precip is below normal:
The northwest isn’t bone dry but it is about 40% below normal which will contribute towards a general tightening and eventually a spot market rally, the only question to ask, and ultimately answer, is whether that will happen this month, or next. We’d be leaning towards this month but bal week doesn’t show any signs of a rebound; too warm and rivers still full.
Mid-C
Loads are off 800 MW, week on week, but also note the contrast between 2016 and 2015 – nearly every hour is off in this year. Blame that on the warm weather:
This chart has looked the same for the last three weeks, at least the temperature half. 5-10 degrees above normal (lows) extending out ten days then a mean reversion back to climo. It is hard to excited about bom Mid-C length, but then again, it would be equally hard to get excited about bom shorts.
Gas noms remain relatively strong:
Though nothing like last year on the same date, this year is off 30% from those lofty levels, but there isn’t a total collapse and nor will there be. The market likes bom Mid-C more than we do, but we were long before the market recognized its foolishness:
While the forecast rallied $0.43 the market soared $1.45 reculting in a $1.02 collapse in the delta. In fact, delta collapsed two days in a row but Thursday’s pull-back was driven by a declining forecast, not a rallying market.
The Light Load BOM market had an even sharper turn around:
But most of the LL rally was on Thursday, though $0.40 of it spilled over into Friday’s settle. Note the forecast has actually come off on both days and the deltas have collapsed an astounding $2.37/mwh; almost the amount they blew out when the market started puking over the Tues-Wed period.
Today is STP Monday and we are braced for more wierdness, but the 10 Day is suggesting we shouldn’t be braced for much, like there won’t be big changes, but we don’t believe that:
The 10 day is suggesting more bom water though we don’t know where they are going to find that water, what with the forecasts below normal for the last week. We suspect some of what is driving their untemperated enthusiasm for big water is their big water supply forecasts, especially for the Upper Columbia:
Look at Libby (Kootenai), sitting proudly with its 113% of normal, and Coulee, the mother of all hydro projects, boasting a robust 108% of normal. Wow, big water year, WY17, right? We sure dont’ see that in the snow pack:
Narry a station even close to normal, but maybe the picture paints a different story:
Nope, same story, no snow, most stations are < 50%, just like our table. So where does that 108% come from? Easy answer, it is the precip anomaly:
There you go, massive positive anomalies, but even those are falling off, coming down, as that rain wends its way to the Pacific. We agree that BOM is going to suffer the impact of October’s deluge, but will Dec? Jan? Feb?, Q2? Q3? ….. not a chance. The October hangover will be gone by Dec and we think the RFC will, at some point, start walking down its water supply #s; if it doesn’t we are looking at big drafts at Coulee, like the 1220 handle type drafts, which makes Q1 look awful, but makes Q2 interesting.
NP15
Loads (ISO + BANC + TID) are up a big, week on week.
But it wasn’t the 400 MW rally over the low loads last week that caught our eye, it was the strange deltas to last year across nearly every hour; 2016 has more base load than 2015, and we suspect it is the super-heated dot bomb market (data centers et al) that is the cause of this base load rally.
Weather forecasts, like the northwest, are bearish:
Don’t count on much heating load for the next ten days, then the outlook cools off but only because it mean-reverts to climo. And you can take hydro energy off the table, there isn’t a drop of rain in the ten day outlook, and now we are seeing the California rivers backing off, shrugging off the October storm, disgorging that bounty into the bay:
Only the regulated projects on the Pit and lower Colorado show increases, week on week, everywhere else is off and will continue to fall off given the dearth of future rains.
Outages aren’t off, NP has some new gas units down:
These are mostly low heat rate units that would be running, if they weren’t being worked on, but they are being worked on and their absence will support prices.
The AC line won’t support prices:
NP is now the beneficiary of about 1000 aMW more energy from the northwest than it was a week ago. All of this lends us to struggle for a reason to stay long at NP (we aren’t, but maybe someone is). Probably the only reason to carry NP length is the limited downside, the hub has been beaten down to a point where there isn’t much room left to fall.
SP15
Loads (ISO SP + LDWP + IID) are up slightly, like at NP.
Interesting that you don’t see the same year on year anomalies that we pointed out at NP; probably because there isn’t any base load rally. Speaking of rallies, it gets hot again in LA:
Back to the 90s, and it is November. Couple that new AC load with declining hydro output and some big units recently offline:
And you got reason to like SP BOM, we like it, more than we like that Mid-C length we carried through the weekend.
Palo Verde
Loads at PV are off 400 MW (week on week, peak)
Off, but still higher than last year, which only shows how much further the hub has to fall.
But those loads won’t crash until temperatures drop, and those temperatures are clinging to five degree positve anomalies, but note the high at Burbank is four degrees warmer.
Nominations remain relatively strong and will stay that way as long as there is AC load and the nuke is offline; both of those conditions will be reversed over the next couple of weeks.
Conclusions
- BOM
- Mid-C: we don’t hate it, it is still fairly cheap, but we’ll take profits and go flat and wait for some sign of cold weather; and while we are waiting that October hangover will get washed out to sea.
- SP15 – we like it and are buying more
- Palo – we don’t like it and are selling more
- Q1
- Mid-C – we don’t buy the 108 water supply number but as long as the RFC posts a big anomaly for Q1 you should be careful about finding yourself too long because of drafts. I doubt that number stays north of 100 by Mid-December (unless it gets wet again) but each day that it does makes us more bearish Q1
- Q2
- Big drafts are good for Q2, no snow is good for Q2, cheap prices are good for Q2 …but alas, it is too early to make a major bet on Q2. But major is a relative word and we would definitely be carrying length at Mid-C for Q2
- Big drafts are good for Q2, no snow is good for Q2, cheap prices are good for Q2 …but alas, it is too early to make a major bet on Q2. But major is a relative word and we would definitely be carrying length at Mid-C for Q2
- Q3
- MidC – same sentiment as Q2
- Plus throw in the Initiative 732 lotto ticket and you might make some serious coin.
- MidC – same sentiment as Q2
