Early Xmas = early eXit

001-tr-q1-mc1Good Morning,

Wow, the market loves the Mid-C; the bom jumps $3.00 this week; it loves the NP, too. It should love them both, we loved them, its cold, its dry, gas is tightening up ..what’s not to love? I’ll tell you what’s not to love, loving that which is loved, we prefer loving that which is scorned, that which is despised and hated; now that what we love is loved by all, we no longer love it.

We’ll steal our own thunder and come out and say it …we’re selling BOM Mid-C Short…there, you have it, don’t even need to read any more, but, if curious, read on ….


Demand

Let’s start with actual loads, they are all up, week on week, but be careful with statistics … though they don’t lie, the statisticians often do. In this case, the numbers are true, all hubs are up, but what was last week, last Thursday …. Thanksgiving. The hubs better be up, and they are:

001-loads-pv 001-loads-sp 001-loads-np 001-loads-mcn

Up, and it isn’t even that cold, but just goes to show how low loads get when every business in the USA shuts down, and its a very warm Thanksgiving.  Looking ahead, weather gets cold, but it didn’t get colder.

001-wx-temps-mcn

The Mid-C warrants two weather forecast plots, not only because it is the biggest hub, and it is the most volatile hub, but because it is the price-setting hub in the winter time. Mid-C is why everything else, even PV, had rallies this week. Acouple of observations on today’s forecast:

  1. The cold falls on a Monday-Tuesday, that is good, but it is short-lived. By the time you get around to trade the BOM monday morning the dailies will be liquidated and bal week will be looking at declining loads.
  2. The cold is short-lived, by week’s end temperatures are at, or above, normal; case in point, is Portland, OR
    1. 001-wx-temps-pdx
      1. Portland realizes a whole slew of above-normal days following the Tuesday “cold snap”; but even  Mon_Tue is not that cold; we’d be doing handstands and backflips if we saw some teen posts, even low 20s, but 29 for a low, really?
  3. The next 8 days are dry – that is the most salient fact in this current forecast. Not bone dry, just not wet, which goes a long ways to protecting Q1-Q3 length in the northwest.

Sacramento, CA

001-wx-temps-sac

Sacto is more bullish, relatively speaking, than Portland as it realizes seven days of below normal but, alas, its forecast has backed off from yesterday – the wrong direction for a trend, a reversion to the mean suggesting this first winter event is lessening, not growing.

Burbank, CA

001-wx-temps-bur

That is just a bearish forecast, every day is above normal; that silly cold spike (Dec 14)  from three days ago was reversed, now it’s a warm anomaly.

Phoenix, AZ

001-wx-temps-phx

Sun City is still chilly, those really early morning tee times might want to be reconsidered, but this forecast has backed off of its cold, too. Symbolic for all of the WECC west-side cities.

001-6to10-dec01 001-6to10-nov30

We like the bottom one more, but that one you don’t get, it was Wednesday’s, the top one is yesterday’s, the cooling trend is reversing …not that it can’t reverse again and grow colder, we just aren’t seeing that and refuse to be bulllish because we are long, we would rather be long because we are bullish.


Hydro

We already said its dryish, not dry as in nary a snowflake, just not wet, and that is all we need to stay long in the Q1-2, especially as we watch the northwest reservoirs mean revert ….

001-res-mc

or a plot, maybe …

001-res-plot-mc

Storage (KAF in the above) has steadily come off over the last three weeks; it had steadily risen over the previous six weeks off of those biblical rains but those are gone, one for the history books, now the outlook barely holds normals and reservoirs are falling. We know they weren’t falling because BPA was drafting for dollars, and we know they weren’t drafting to serve load — but BPA will be drafting to serve loads next week:

001-rfc-10-day

The NWRFC 10 Day has added about 800 aMW of hydro energy versus last Monday’s STP …that incremental energy is not due to falling rain, it is coming out of the reservoirs …helping to quash any cash rallies …but also helping to support Q1-Q2-Q3 length. Bullets shot in Dec are bullets not available down the road.

One indisputable bearish item for the term is their Water Supply outlook, let’s take a look:

001-wat-sup

Wow, TDA gapped 4%, the Flathead gapped 5% … it must have really snowed hard, right? Wrong:

001-snow-mc

We don’t have a single major production basin at normal, most are barely half of normal; granted there was a rally, week on week, but the rally was off of next to no snow. Hard to get to a 113% of normal on the Kootenai when the snow basins are at 51% … we think those numbers must be walked down with normal precip going forward, and we are not really seeing that.

001-precip-city

Everywhere is above normal, but not crazy above, so just don’t get to the #s the RFC is at. We also think that post-cold the reservoirs will be even lower and perhaps than the RFC will be fed new regulation #s and lower their outlook. Let’s say they don’t, and they keep Coulee above normal, that suggests a rather big draft, perhaps 1230’ish, much of which will be pulled in Q1. Maybe it is getting time to start thinking of selling the Q1|Q2 spread? Nah, not yet, we’ll stay long both of them.


Generation

Not a lot to report here, a few new units off line:

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and a few came back ….

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Cold typically is associated with calm and the forecast is showing total windi (WECC) off almost 4000 MW for next week:

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it’s bullish, but nothing like what the collective demand will do next week:

001-wind-dem-wecc

Peak wecc demand should be 6000-7000 mw higher than today, couple that with the 3000-4000 mw less wind, and you get a recipe for some nice price action.


Transmission

We found the net flows out of ZP to be worthy of a chart:

001-tflows-1526

Note the massive drop over the last two days in northbound flows on Path 15. Doesn’t make sense, NP’s loads are up, right? But it does make sense if ZP’s and SP’s loads are up, as well, which is exactly what is happening …net effect is to squeeze NP even harder.

The AC is interesting just because of the TTC derates, but it might get more interesting early next week.

001-tflows-ac

Will the hub (Mid-C) keep exporting when it scrambles to meet its own loads? We think yes because the price in the ISO will warrant the northwest to crank up everything it owns; we’re already seeing the genco’s sweep away the cobwebs from their “Start buttons”:

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Units are coming back to the fold, we think all of these plants will nominate on Sunday for Monday; we also think every hydro-owning utility will be running water through every turbine they own …and we think the AC will be full.

The northern intertie is nearly full, south-bound:

001-tflows-bc

The Canadians like the price, what isn’t to like after seeing the Mid-C wallow in the teens …expect our friends in the north to be aggressive sellers next week, though their loads too will rally, but the price in Amerika will be too tempting.


Conclusions

  • BOM
    • SP
      • 001-tr-bom-sp1
      • We were short on Wed, market trickled up, but we see nothing to change that sentiment …. SHORT
      • NP
        • 001-tr-bom-np1
        • We were long but won’t stay that way and will take profits by selling into strength……….FLAT
        • BONUS TRADE – NP Light Load
          • 001-tr-bom-np2
          • The model really likes this, we think the northwest will try to conserve bullets for peak hours, and its coldest at dawn …we’ll go long the off peak
        • Mid-C
          • Same trade as NP, except we are going to sell MId-C on peak short and go long the off peak
            • 001-tr-bom-mc1 001-tr-bom-mc2
            • The market is over the forecast in the on, under in the off, and we’ll go the opposite and be short the on/off
      • Q1
        • Mid-C
          • 001-tr-q1-mc1
          • Market is moving up in sympathy, forecast is not really changing – note the big gap from a few weeks back, mostly gone. We still like owning this in front of the cold, some of that Q1 water is going to get burned next week, plus its not super wet …………….LONG
        • Q2 MIdc – still long.