Good Morning,
We are turning, yet again, which means we have now done a full circle, we have spun 360 degrees, we are now bears, and we are selling anything that dare showeth a bid. When we are done, our book is net short. Why? Read on…
Markets
Let’s start with Friday’s wild ride up
Monthly Changes – Market and Forecast
BOM Mid-C HL up $8.00, every other hub up, huge rally and good rally if you were long. Even the Qs jumped:
If you sort that table ascending on Market change you don’t get nary a negative, neither do you on the monthly; everything is up. But most telling, to us, are the ever widening deltas between the forecast and the market (CHG F-M) in the monthly table, these are growing so wide we find them unsupportable, given the fundies we are seeing. Tippy toppy, heavy market … but do the fundies support these levels? Before we go there, let’s finish looking at markets, especially the ISO.
Down, but not a shocker, it wasn’t that cold over the weekend. The Hour Ahead market is more telling, we think:
Our virtual hubs (averages of outside BAs) shows the volatility the Mid-C realized, but also highlights the lack of volatility over the weekend, the weather warmed and not much happened.
In this table we compare the hour ahead market to the day ahead and sorted on the DA-HA column, ascending. Massive deltas on hours 18 and 10, with HA over. The mirror of the above:
Different hours, different BA, but equally large deltas. Interesting, huh? We thought so. Now, on to those fundies we alluded to, several times.
Demand
First, let’s get loads out of the way, there isn’t much to report, there are no massive, week on week swings (Sunday to Sunday):
Not a lot need be said, the weekend wasn’t cold. Going out, however, on Friday we saw some very cold weather, some OMG cold, but we see that has abated somewhat today (call it BFD cold, if you like):
Mid-C Composite Minimums:
Note the first plot, temperatures, and the huge rally over Friday’s forecast … bearish, relatively speaking when compared to last week’s outlook, still bullish in absolute terms, still cold, still below normal, but not OMG cold, more like BFD cold, and not BOM Up $8.00 cold, either.
Also note the dearth of wet this week, but followed by 14 days of precip. We like holding Q1-3 Mid-C length when the outlook is dry, we like to hold it when the market pounds it down to nonsensical levels …we don’t like to hold it in the face of above normal precip nor do we like to hold it after it rallied hard.
But the above is the composite, what about Portland?
The City of Roses barely breaks normal, this is no event, this is normal, everything is normal but the prices.
Hah, sacto is well above normal and is facing two inches of precip, nothing bullish there. The rest of the cities (PHX and BUR) are no better:
Burbank chills out, but not until next week, meanwhile the LA basin is going to get about 15% of its annual precip in a single day. The silver lining in that rain cloud is there will be little or no solar.
Hydro
The hydro outlook is growing more bullish off of declining reservoir levels and more bearish off of increasing precip outlook, plus improving snow pack.
The hub is now below 14 MAF in storage and is quickly approaching the four year average; recall there was nearly a one maf overhang a few weeks ago, not it is almost gone, and after drafting to serve loads this week it will be gone.
This table reflects the cumulative ten day precip in the current forecast, sorted descending. Not often will you see the Mid-C come in fourth place, clearly the big events are further south, but the hub with 30k mw is still above normal where it was half of normal on Friday. Let’s take a closer look at the stations:
Not a lot leaks over to the east side, just call it normal for the Mid-C stations, though the Sierras wil get pounded. Given the cool weather all of the precip comes down as snow, and the outlook for snow is growing everywhere.
Mid-C Basins
This table is sorted on downstream generating capacity, so the top matters more than the bottom, and that top is quickly approaching normal, in some basins it is now above normal. With above normal snow coming, the hub will slide into at true positive anomaly, we say true because the RFC has been wildly too high for the early part of the water year, but reality is catching up to their numbers.
Other Snow Basins
The rest of the west is below normal, though these impending storms will move every one of those basins up.
Today is STP Monday, let’s take a gander at the 10 Day:
Every day is higher than last week’s STP, which suggests today’s STP should sport higher BOM numbers, but given the RFC’s walking down of its water supply #s:
We think that Jan-Mar could be given haircuts, especially that goofy March number. Before leaving hydro we wanted to take a look at the northwest rivers, post- cold snap:
The great thing about having so much hdyro capacity is having so much hydro capacity, the bad thing about having so much hydro capacity is having so much hydro capacity, especially after an event has expired. What we mean is look at the large positive changes, week on week, across all the major projects. Up 15k-30k across the board. Granted there is more cold coming, not as cold as it once was, but cold enough to force BPA et al to continue drafting to serve loads. Great, draft away, but there is a lingering residual effect of all this drafting … it takes a week or so to work that marginal/incremental water out of the system. Meaning, the week following the cold can be very bearish as the cold-weather water now crushes the warm-weather markets. We think we’ll see something like that happen next week rendering those $45 boms kind of scary, kind of stupid, kind of “won’t last long”.
Generation
The ISO, SP in particular, has a lot of outages, a lot more than two weeks ago:
SP has almost 5000 MW more offline today than two weeks ago, while NP is unchanged.
New off line:
Returned units:
More came off than came back, hence the bump. Speaking of bumps, the Mid-C wind outlook is looking longish:
Transmission
We noted some work on the AC line over the next few days, not that it should matter, the loadings haven’t begun to approach the derated values:
Flows inside ZP have returned to normal:
That just reflects the reality of a healthy system, there was no stress this weekend. The northwest continues to be stingy with its energy:
Though the DC saw exports rally about 500 aMW over its weekly average; the AC still is tight but is loosening, though remains 500-1000 below full.
We saw the Northern intertie flowing right at its weekly average as the load situation up north abated over the weekend.
Conclusions
- BOM
- Mid-C
- Uhh, yours…we are selling this short
- Other Hubs
- Uhhh, short, short, and shorter
- Mid-C
- Q1 and out
- All length is sold, we are net short at Mid-C in Q1 and Q2, flat beyond