A Bull Turn

Good Morning,

Weather heats up, Coulee fills up, CGS is offline, and crude soars this morning. All bullish, all real, all good in da wecc hood. Alright, let’s get started by examining ISO prices over the weekend:

Excellent price spike last evening, HAs cleared north of $130 for a few hours, on a cold day! Also saw some MidC to NP congestion though the relative price for the former was astounding given an 180 kcfs discharge at Coulee. Congestion also showed up in the SP – PV spread.

Crude is poised to soar today on news that Putin is meddling in oil politics and the world is cheering. That man deservedly earned the Meddler of the Year award, what doesn’t he meddle in? He cheated in the Olympics, he cheated in our election, and now he is cheating in the crude oil markets.

Demand

A frosty weekend for most, though we did see Palo’s temps rally from last week’s very cold. Everywhere else was just cold, especially in the Northwest interior where lows were in the 30s. Some of the surges in snow melt will be arrested by this week’s cooldown, but that is just a short-term respite, the weather warms later this week, and the runoff will regain momentum. And be sure of this, the runoff will crest in May, not June, as snow is quickly dissipating, morphing from a solid to a liquid.

Loads at the traded hubs were a mix, a few sideways (SP & MidC), Palo up, and NP down. The weather outlook is attractive, at least to a weather nerd:

Phoenix returns to the century mark and stays there for a solid week, but before that happens, it must work through a very mild day tomorrow. Also take note of the red line, the ten year average, which is upward sloping and approaching 100 degrees – summer is here, at least in the desert.

Cally gets warm, too, but the heat is all in the interior, there are no Santa Anas in May, just onshore flows that keep loads from doing anything too bullish. Still, Burbank posts a forecast in the high 80s; maybe it will reach 90? Sacramento is predicted to realize a string of 11 days above normal; even San Jose approaches the 90s. But what about all that snow in the Sierra’s? Bearish, right? Not so fast, cowboy, some stations are seeing that snow either gone or receding rapidly. We are now inclined to suggest peak water is already a thing of the past, and some plants will soon be running less than hydraulic capacity:

The Merced is at zero, albeit lower elevation, but indicative of where the snow levels currently reside. Still, some stations are deep, but we are looking for incremental relief, and now we see that. With ten days of above normal more will come off all of which means less for June.

Interior cold in the front, then a week of above normal which will re-charge the melt which is why we think Memorial day weekend may be the peak runoff period. Note SWE table above, the Deschutes and western Oregon are down to less than 10 inches.

One indisputable conclusion we can all draw from the MidC outlook is the bearishness on demand. The load centers can barely post the mid-70s, the HVACs will be replaced with screen doors. Peak water and Trough demand should set the bottom for MidC cash, but in this new era of water management don’t expect single digits. This year truly is a paradigm shift in how BPA manages runoff and is worthy of revisiting your hydro algorithms – we are. More on that later this week.

Hydro

Big refills over the weekend, Coulee added four feet in a few days and Lake Pend Oreille rose three feet. The latter is more interesting than Roosevelt since full is 1262 and they filled 20% in a few days. With a surge coming in the next week (off of warm weather) we expect PO to approach full by Memorial Day unless BPA passes more through the river.

California is dry; it has been dry for a month.

Kalispell is set to get an inch over the next ten days, nearly as much as Portland or Seattle. We are expecting to see builds on the Flathead snowpack this week; then the melt will resume.

California rivers are off from cool weather and a dearth of precip. That trend should reverse itself over the next ten days with a return to warm, but some stations, like the Merced, are on their death march to Summer.

Northwest side flows are off; cold weather will do that. Note the double top on the Middle Columbia chart, that one isn’t even close to peaking, we think we’ll see a 60 handle by the coming holiday.

BC Hydro stations are more up than down, and we saw flows at the USA|Canadian border touch 200k. Toss in the Spokane’s 20k and perhaps another 5k from other streams and Coulee approached 225k inflows over the weekend. No wonder it added four feet to its reservoir.

The Clark Fork continues to build, now it is over 70kcfs, so is the Salmon – neither have crested though we believe they will within a few weeks. The Skagit is off from the cold weather, but the Deschutes is dropping because SWE is disappearing. The Spokane reached its peak a month ago; there may be another surge to the mid-20s then it’s done.

Despite aggressive refill, Coulee still discharged 180kcfs through its turbines over the weekend, plus there was petite shaping. The spill at BON is near a season high and note that Albeni Falls hasn’t generated an MWH in a month, BPA just spills everything there.

Before leaving the wonderful world of water, let’s look at how much snow is left. We highlighted the colossal years, 2014, 2011, and 2008 – compare those to 2017. This year dwarfs the last two but is itself dwarfed by the big ones, hence our conclusion that runoff peaks by the end of May. We think our buddies in Portland concur:

The Feds have slashed output across the STP stations for the next ten days (as of Friday, mind you). We’d be inclined to suggest today’s STP is going to be bullish … oooh, la la.

Trans Gen

The AC rallied hard over the weekend; the DC is as steady as the Nuclear Clock; BCH was a buyer of cheap, and flows were southbound out of ZP.

Outages in the ISO are bearish, more gas units returned than tripped. Noms are also indicative of a bearish market:

Let’s take a deeper nom dive:

Palo noms are off today but look at the 475k (mcf) as compared to the last two years, same day. Gila has backed way down but we know it’s available should it be needed, not sure on Harqualah, may be down for maint, but guessing it comes back shortly. PV2 is back and PV3, which was down for a few days, is at 13%.

NP noms fell off a cliff versus a week ago and dropped even further compared to the last two years. SP is same, off even further from prior years.

Mid-C is keeping just enough gas online to support HL prices, and just barely. We still wouldn’t be surprised to see cash trade single digits this week or next; then it will be off to the races, we think.

Conclusions

  • BOM
    • MidC – we fear the surge in melt, but CGS is offline now (which pretty much means it will be offline all of June, too); we also fear miserly demand
      • HL Short
      • LL – no position
    • NP  – Diablo is still off line, and the hub gets a string of warm days; we don’t like the hydro, but that fundy is decaying rapidly and incrementally doesn’t take too many MWs to push through the tight stack
      • HL – long
      • LL – long
    • SP – loads will rally, outages are dismal which leaves them, but one way to go
      • HL – long
      • LL – short
        • Cheap time to put on that spread
    • Palo
      • HL – long, off of heat and issues with PV3
      • LL – short, relatively inexpensive entry point
  • June
    • MidC
      • HL – long, we think water crests before the prompt trades cash, and we want to hedge our short BOM
      • LL – still long, but doubling the position today
    • SP
      • HL – long off of May’s return to heat
    • PV
      • HL – long off of bullish cash outlook