Good Morning,
Sometimes the markets are spooky quiet, too still, and they remind one of the cowboy movies. The grizzled cookie is sitting by the fire, stirring the dying embers, and observes “it’s too quiet out there.” A minute later a hundred Apaches descend, and the scalp-less Cowboys are left lying in pools of their blood. We think it’s “too quiet out there.”
Whose blood will you be lying in? Yours or a counterparty? Not ours, we hope. Things feel like they’re soon to change, we think Mid-C’s blood will be the first to be drawn, and it will be low-level snow that carries the knife:
The icebox called Mid-C has cumulated a lot of precip, on the ground, that could create consternation via natural river flows if it would only warm up. The south is inured to much pain; its outage season hasn’t begun, and its winter loads are weak, soon to be replaced by spring, and perhaps early heat. Last year we saw some mid-80s early in Phoenix, even Burbank saw some early heat.
Something like the above could be another Apache, tomahawk in hand, looking for an SP Bearish Cowboy. It’s too quiet out there.
Demand
What we see is what we get, not a lot of changes in the near term horizon:
Way below normal in the deserts and modest warming for a few days, but then followed by a return to below average.
California is cool for the next couple of days, but then just flirts with normal for the balance of the forecast.
The Mid-C is showing signs of warming up, after a brutal two-month freeze. With lots of low elevation snow, those warming temperatures bring with them a double-edged knife: declining demand and rising natural river flows. Today’s forecast isn’t warm enough to make anyone lose their hair, yet, but perhaps the trend is moving that direction.
Loads look like temps, not doing a lot:
MidC and NP15 are both down, week on week; MidC a lot, NP marginally so. The rest of the hubs are up.
Temperatures tell the story; Portland and Seattle are baking in the 30s and Sacto and SJ in the 40s; not cold enough to spark much demand.
Hydro
Our friends in Portland are jumping all over the map with their forecasts:
How’d you like to be a Slice customer and use that forecast? That ten day is perhaps the most volatile in the last nine months. First, we see significant cuts in the next couple of days; than 1000+ aMW rallies in hydro energy next week. Couple that new-found energy with the warming weather and MidC starts feeling like that cowboy movie.
California dries out; it needs to, the poor state was drenched over the last few weeks, its rivers are at the WY17 peak.
The Mid-C has another “event” on the horizon; we first pointed this out on Monday, it hasn’t gone away suggesting it might be for real. This isn’t a big storm, but it’s not dry, and the water supply outlook just turned a shade more bearish; important because this comes in front of the Feb 5 final # used in the Flood Control.
The RFC is picking up a piece of it in its QF10; the massive cuts in TDA and GCL have been arrested, the IHR is up a tick even though the 10 day precip outlook is about 20% of average; but with this storm lurking just beyond the horizon we expect Friday’s, for sure Monday’s, forecasts to be up a chunk.
Healthy discharge at Birchbank, that 100kcfs will keep the pressure on Mid-C, if only that low-level snow would melt, maybe we’d get a meltdown? Both BON and GCL are off big-time from last week, so is the Willamette. The Sacramento is off the charts, and now the San Joaquin is full – that suggests Big Creek is probably at hydraulic capacity. Not often will we mention rivers in Arizona, but will today – check out the Salt River! I wonder if they are tubing today? Might be their one shot at floating through Phoenix this year. Side flows on the Lower Columbia are up, but the Mid and Upper Columbia are still ice skating rinks. Some 50s, or better, 60s might put another 30kcfs of unregulated water into the system, though much of that would probably be spilled.
TransGen
ISO outages remain below historical levels:
Though they did tick up from yesterday, only because Diablo One is off 550 MW. Contrast today’s total outages with any of the last five years – down about 3000 MW, or compare against 2014 – off 7000 MW. That is what we’re talking about, won’t be too quiet once those outage Apaches ride into our camp on their spotted Appaloosas.
Aside from that Diablo unit, the rest of the new outs are irrelevant.
As is what returned, a smattering of hydro, bio, and solar … yawn.
Gas Noms are weak, aside from the Northwest, which is surprisingly bullish:
You know when Mint Farm bothers to nominate the hub is tight; it hadn’t posted a nom all week, then it comes out fully fueled. The hub, in total, is up 160 kmcf.
BC was a big seller yesterday, so was MidC via the DC, not so much on the AC, while flows out ZP are weak.
These plots come from the EIA BA data; unfortunately, they don’t force the Utes to publish this real-time, it is a day late and a dollar short, but it’s better than the old world where the box was utter blackness. These four charts plot flows in the WECC interior, and we find them somewhat interesting, but also want to point out the data is there if you are so inclined to view it. You can also see it by BA itself, non-aggregated, and in those views you can, on occasion, discern coal outages.
Conclusions
It’s still quiet out there, maybe not “too” quiet, but we feel things might heat up once we dump January. On days like this, being flat is not a bad thing, but you’re paid to trade/hedge, so let’s jump in and see what’s what:
- Feb
- Everything (HL) is up, but the Mid-C is up the most …. Yours
- Mid-C HL ….SHORT
- Mid-C LL …. SHORT
- SP HL …. LONG
- SP LL …. LONG
- Warming weather in the north has our attention, but if it cools back down, will be quick to stop loss. The RFC’s extra nuke next week also is on our radar screen; given that the trans lines are full you shouldn’t expect any relief from more exports.
- Everything (HL) is up, but the Mid-C is up the most …. Yours
- Mar
- We already have a short bet on at MidC; whatever Feb does, March will mimic, at least for the next couple of weeks. If we want more short exposure we’d put it on in front. That said, we are still fans of the SP-MidC and will take a piece of that
- Long SP, Short MidC
- We’ll also come ouf that SPPV we did on Monday
- It came off a bit, we got an “atta boy” from the boss, made our $0.50, now we actually like it from the other side LOL. Look at the chart, trading at near historical lows.
- We already have a short bet on at MidC; whatever Feb does, March will mimic, at least for the next couple of weeks. If we want more short exposure we’d put it on in front. That said, we are still fans of the SP-MidC and will take a piece of that
- April
- What’s up with April Palo LL? Looks like the Trump Impeachment calls, now the On|Off spread is nearly flat and look at the SP|PV off spread – it’s backwards, doubt we see energy flow east out of SP. The Mid-C is rallying too, but way too much uncertainty for us to own that.
- Apr PV LL – short
- Apr SP LL – long
- APR SP|MC long
- What’s up with April Palo LL? Looks like the Trump Impeachment calls, now the On|Off spread is nearly flat and look at the SP|PV off spread – it’s backwards, doubt we see energy flow east out of SP. The Mid-C is rallying too, but way too much uncertainty for us to own that.