Good Morning,
Very little chance to see a rally in the bom, it is a bust. There are some hints of bullishness lurking in the data, but those hints are feint, one has to look hard, one has to want to find some reason to own length to find those hints. If one wants to find reason to be short one has not far to look, those hints are all over. We choose to ignore the obvious and look for reasons to be a contrarian, we have to look real hard, and really didn’t find much.
Markets
The day ahead LMP is one hint, feint one, but it is up, week on week, but you can credit the gas rally for any upward move there:
The rally off of last week’s puke-down is not feint, it is real and really big, but then the melt-down was big, really big, so really we are just back to where we were, but at least it didn’t keep melting, it has stablized.
What is melting is the Palo market in the ISO:
Melting like a Cherynobl reactor core; Palo barely even registers, can’t even participate in either of the day’s peaks yesterday. But Mid-C does, it rallies with both the morning and evening peaks, congestion is minimal.
Another “bullish” nugget are the crazy $1k spikes in the EIM; these are littered throughout the last two days; strange because the fundamentals are about as weak as we’ll see this year. One “explanation” is the EIM market is a random walk through a dysfunctional market. We’ll go with that one, but if someone can explain a $970 price gap to us, several times a day, we’re all ears.
Demand
One indisputable bullish factoid are loads in the Mid-C – these are gapping up, week on week the hub is up 3400 MW on the peak hour, and it hasn’t gotten cold, yet. That cold is coming, though it is just a reversion to normal, but these loads are going to keep moving up as temperatures move down:
BOM doesn’t have much hope, the most bullish factor is its cheap price, nothing else. But DEC, the prompt is looking more interesting as the composite hub temperature is projected to slide 14 degrees over the next two weeks. Granted, weather forecasts two weeks out are about as accurate as US Presidential polls two hours out, but still, if it happens it will be bullish.
Just to get a flavor for how bullish it might get, let’s look at Seattle, my home town:
Seattle, WA
Up about 25% ,week on week, on relatively mild weather. A slide to the low 30s will jack loads another 1000 MWs (peak). We like our Dec length.
The rest of the hubs are in load retreat mode:
Down, down, down. What more needs be said? And the weather outlook doesn’t look any better:
Down, down, down. Except for NP, down not good, down a downer, but the bottom has mostly been found, and eventually down is up, now down is just down. We also note Precip in NP is up, which is a downer.
Final parting bearish Novy shot:
November Month-to-date Degree Day anomalies
Out of these 20 or so stations all but two are below normal, most are materially below normal. Explains a lot about weak gas, weak power, weak enthusiasm.
Hydro
Just when we had our audience all hot and bothered about owning some Mid-C we have no choice but to throw a bucket of cold RFC water on your unbridledd enthusiasm:
Oh Shyte is right, the RFC is angry at you bom longs and is tossing out an additional 1000 aMW of energy into the backend of its 10 day – this bodes poorly for next Monday’s STP and somewhat curbs our enthusiasm for our Dec length, but we think their dramatic change of forecasts is over done. it is wet, but not epic-wet:
Every composite hub 10-day precip forecast is over normal, but just barely and we are not that concerned, though we’d rather see dry anomalies for the remainder of the month. The city outlook is not qutie as bearish as the hub-level:
Seattle skews the hub level (though it is weighted low) with its 4″; Portland is not far behind with 3″. Face it, this is a wet outlook, if it holds it puts more water into bom which spills into dec. Enthusiasm curber, though not convinced the RFC is justified in its draconian updates, especially given that the change, day on day, is really not that big – at least on the east side it is not that big. Spokane, for example, has less rain than it did three days ago, the rest of the east side is barely higher …so how do you get another 1k of energy? Perhaps it is BPA regulation revisions?
We looked out our window yesterday and saw the Cascades changed color, earlier this week they were a lovely blueish green, yesterday they were an even lovelier white – it snowed! But not enough to change the bullish year to date snow anomalies very much:
Nothing is even close to normal, you have to look at precip anomalies to see something above normal, and those are off the charts above normal. The only way rain, though, can impact this water year is through rising reservoirs, and that we do see:
Mid-C now has more bullets (kaf) in the bank than in any of the previous five years, that is indisputably bearish and will take the hub months to work off and could pose for some big drafts this winter.
Generation
Nothing good in this sector, ISO gas outages have fallen over the last couple of days:
We see a smattering of new outages, offset by a similar number of units returning to active duty:
The capacity returning will accelerate over the next six weeks and eventually, by the end of Dec, about 5000 MW of gas capacity will be added back to the stack:
Call it incrementally bearish, though the wind generation outlook looks a touch more bullish than the recent past:
Not crazy bullish, just a touch, but remember we are seeking anything to hang our bullish hat on, so a 300 aMW drop in wind at NP is fair game.
Transmission
The AC has a few short-lived derates to look forward to this month:
Meanwhile, flows are off on the line:
Call that bearish for BOM (as is the TTC derates). The DC is not full, but it is close to full:
While BC has slowed down its selling:
And is actually doing a bit of buying for the first time since the DC returned. Perhaps it because some of its run of river plants are drying up?
The Cheakamus discharge is off about 90% from a few weeks back and is typical of most of the province’s natural river flows. BPA has turned off the Arrow spigot and now the reservoir is filling:
Conclusions
No changes from out Wednesday outlook, we will stay long Dec Mid-C, short the bom; will keep on the length in Q1 and Q2 mainly because we want to see how cash behaves following the 10+ degree drop across the hub and what the market does to the term when cash jumps. We’d be early sellers of that term, however, as the reservoir levels are a bit spooky, but that is offset by the dismal snow levels, though this latest precip may put many of those basins back to normal, then we’d be even more spooked.
The outlook down south is just dismal, despite the EIM’s popping $1k prices like champagne corks on New Years. We choose to ignore those numbers, they are meaningless as far as we can tell. What isn’t meaningless is declining loads and declining outages, we’ll stay short down south.