Winter

Good Morning,

The long awaited cold weather is finally arriving, the question which remains is just how cold will it get and does that change in weather warrant the market’s recent bullishness? First, the cold …

001-6to10-temp-day1 001-6to10-temp-day2 001-6to10-temp-day3

The top is yesterday’s 6-10 day, next is Monday’s, followed by Sunday.  Clearly the trend has cooled significantly and is pushing into the load centers, but doesn’t quite make it. Portland, as a case in point:

001-wx-pdx

Blue circle, good, right? It’s good because the 10 degree positive anomalies are gone, for a few days, but it remains but a scant 2 degrees below normal. Cold snap? Not hardly, it would be more accurate to call this a “Normal snap”, then weather snaps back to a warmer turn. We’d love to jump up and down and yell “I Told You So” but that would be in poor form, we have been long the Dec for at least a week, we have been right, market-wise, and now we are right demand-wise, but that market-wise correctness renders us with a weaker conviction to carry this length much longer …  more on that later.

The rest of the west is cold, too.

Denver, CO

001-wx-den

Eleven degrees for a low, PSC’s loads will rally, but the event is short-lived and doesn’t coincide with Mid-C’s cold.

Sacramento, CA

001-wx-sac

35 for a low is the lowest of the season and we’re pretty sure the Sierra Club will forget about carbon and global warming on those days – everyone will be cranking their heaters and silently thanking the gas utilities for having the foresight to inject gas into their methane bombs, I mean storage sites.

Burbank, CA

001-wx-bur

Lows hit 42, Socal Gas will get some heating load and pull down its precariously low storage even further, but the cold is not building, it is retreating. Look at the forecast three days ago, ten degrees warmer. We like seeing these events build, not retreat, we also like seeing them last longer than a couple of days, and we also like seeing all load centers realize the events on the same day …they don’t, each hub sees its lows on a different day thereby neutering much of this event’s impact on price.

Phoenix, AZ

001-wx-phx

Too bad the Phoenix anomalies weren’t shared across the load-center cities in CA and the northwest, then we could get excited. PHX enjoys a string of below normal anomalies that last nearly ten days; funny because they enjoyed anomalies on the other side throughout Nov, now they get to enjoy cold weather.

Loads are not really newsworthy, we won’t bore you with them today, but what isn’t boring is the following:

001-rfc-10-day

Where the sky was falling a few days back because the Whipsaw Center slapped an extra two nukes into the Mid-C, yesterday they had a change of heart and backed all of it off, even backed it below the miserly STP forecast.  Now that they backed down those numbers we think they are wrong again, but to the other side. BPA is going to crank its hydro turbines to serve loads, so will BCH, and all of that water that is now parked in the reservoirs is coming soon to a turbine near you. We think the actuals may actually be closer to the forecast from a few days back; not because of epic rain, but from generation to meet this new load.

The ISO must have issued an “All Hands on Deck” warning to its obedient generators, check out the outage status today:

001-iso-out-hub

Dropped 5000 MW from last week; our only explanation is the ISO fears the cold, but then it could just be scheduled returns to meet the typical Dec’s winter loads. Here is a list of the units that returned over the last three days:

001-iso-out-ret


Conclusions

  • BOM – we will let our length ride out through the long holiday weekend
    • Mid-C
      • 001-tr-bom-mc1
      • Both the market and forecast are rallying; cold weather is coming; the B teams will be running the desks over the long weekend which usually means things will get crazy … we’ll remain …………………LONG
    • SP
      • 001-tr-bom-sp1
      • Not as excited about carrying our length here, not with so much capacity back online, but we feel prices are still relatively cheap and will remain … .LONG
    • NP
      • 001-tr-bom-np1
      • Both the forecast and market are moving up in tandem, we see no reason to take off the length and remain ……………LONG
  • DEC
    • MidC
      • 001-tr-dec-mc1
        • We wouldn’t fear carrying our length through the long weekend if we didn’t fear the forecast turning warmer, but signs are pointing that way. BPA has too many bullets to fire at cold weather, so does BCH, the lines are already full and it just isn’t that cold …we are going to take our $3.00 of length gain and call it a happy Thanksgiving ……………FLAT
      • FLAT everywhere else as we prefer not to think about the market during a holiday, plus bonus season approaches and we dare not jeopardize our seven digit number.