Mid-Week Update

Good Morning,

Today is a short update; we’re visiting friends in Houston. Most striking, from our eyes, in today’s fundies was the 111-degree forecast for Phoenix in a few weeks:

Granted, that day is two weeks out, and one shouldn’t place much reliability on a weather forecast beyond a week. That said, some bold forecaster saw something in the weather models and stuck his neck out, we admire that behavior and will monitor how that forecast changes over the next week. Even if you throw out that two-day event (May 31-June 1) you’re left with a string of 100+ days at Palo, and we lean towards bullish in the hub,

Cally is not hot, but it is warm, and Sacramento has five days over 90 degrees which will drive NP loads up and snow levels down. Speaking of snow and NP, check out the Pit River:

Wow, we haven’t seen a California river shape like that since November. Clearly an indication of a system that is seeing inflows dropping. Note the biggest cuts were during the Solar Hours. There is light at the end of Kalistan’s hydro tunnel.

Portland is poised to post the high 80s and set new ten-year highs:

Next week should be the final nail in western Oregon’s water year; the snow levels are already low. It isn’t just Portland that is warm; the interior will realize mid-70s and the next surge in melt will recharge the rivers.

They need a proper recharging; most non-storage projects are falling hard off of the cold anomalies of late. The Side Flows say it best:

All are off, some dramatically, but next week’s warm weather will drive a new surge, and new seasonal highs will be realized. Regulated flows are off a bit at Coulee:

Yesterday’s 24-hour average dropped 12000 cfs from earlier this week but note the dearth of shaping, BPA still can’t shift water intra-day despite adding a foot each day to Lake Roosevelt.

We see a new export regime out of the northwest; check out the AC and DC loads over the last few days. Massive swings where generally this spring the lines were pretty much base loaded. All of the cuts over the last few days occurred during the ISO solar hours, which makes sense given such weak prices. More telling is the northwest’s ability to keep that energy home which to us is indicative of a less long system.

Cool weather coupled with declining outages is bearish, but the ISO didn’t even need those units as its demand has fallen hard.

 

The ISO saw some big outages return led by High Desert.

And a few new units were taken off line, most notable being Elk Hills.

Noms inside the ISO hit seasonal lows which merely reflects the weak fundamentals of late caused by very cool weather.

Conclusions

  • MidC – Our MidC roll was smoked over the last couple of days

And now it’s trading at a contract low which only makes our appetite to own more of it grow.  June will get see CGS off-line for most of the month, the odds of very hot are infinitely higher than May, and we believe peak water will be realized in BOM. Therefore, we see no reason why May would be a premium to June.

LONG the roll

  • NP15 – we left ourselves long at NP and got paid, we like seeing the PIT shape and the heat next week and will stay long both on and off
  • SP – we put on the long On: Off and didn’t see much of a move, but like the HL lotto ticket and will keep it on
  • Palo – owned the same trade here and it didn’t move, but will double down on size off of next week’s heat. Most of the low heat rate gas turbines are back and will be idling at night to serve the 100+ degree daytime loads. We expect the cash spread to blow out.
  • June MidC LL – our call here, long around $2.00, has doubled, but we’ll be a pig and own more of it.