Good Morning,
We were caught by surprise, almost dumbfounded, to see where the MidC cleared in cash yesterday:
The hub settled north of $29.00, all the while Sumas trades around $2.30, implying a heat rate of around 13k. Was it really that bullish? Seattle scorched out an 83-degree day, but Portland was about the same:
But 83 is not hot, especially not in Portland. Perhaps the bullishness can be explained by hydro? To address that hypothesis let’s look at BPA hydro energy:
Well there you go, poor BPA found itself with less energy on a day where demand was 3000 MW higher. Unlucky, huh? Wait, before we cry crocodile tears for our federal brethren let’s try to find which plant led to the energy decline – don’t have to look far, just go to Coulee:
Yep, the big boy saw about 30 kcfs cut in discharge through the turbines, unlucky, huh? One more chart, before we start bawling:
LOL – spill jumped 30 kcfs; spilling on the hottest day in the northwest since last summer and cash clears almost $30. If that isn’t an outright case of market manipulation, I’ve never seen one. Why would you ramp up the spill in a strong market? Of course, you BPA enablers will say the spill is due to construction, due to units offline, but the spill chart suggests an awfully strange “maintenance” schedule. No, they spilled to drive price, deal with it and make your book look like BPA and you’ll be just fine. Our book (virtual) didn’t look like BPA, and we don’t feel fine, we feel angry and ashamed. I guess that is why our book is virtual, and yours is real.
Continuing with our anti-federal government rant, let’s talk about Monday’s STP.
Black is this year, blue past years. The past year we are especially interested in is 2014 since it was also a “wet” one, though by the looks of that chart it was nothing like 2017. Snow-wise suggests otherwise:
This table is sorted by downstream cumulative production meaning the basins which matter are on top. And every basin above Coulee is lower than 2014 and don’t even bother comparing this water year to the really big years, like 2012, 11, or 08. And the above numbers for 17 are from yesterday morning, wait until today’s are published, the contrast will be even more dramatic.
Point being, this was a big water year, it isn’t now, there is very little snow left, and by July there will be none. Big water years have melts through July (1999, anyone recall that monster year?). So our thought for the day is to exercise caution in relying too heavily on Monday’s STP, we think there are downward revisions necessary in the weeks to come.
Every Other Fundamental
Temperatures cool off everywhere; the MidC is poised to get an inch of rain this week (Spokane gets an inch); the ISO had no changes in its outages. Gas noms were interesting:
SP sported a four-month high, and the LA basin wasn’t that hot; Palo’s noms have come off from an eight-month high, and MidC stormed back chasing those $29s.
The DC and AC were fully loaded, and BC swung hard out of soft weekend prices and into Tuesday’s other-worldly cash. So they bought $0’s and sold $30s, wow – nice work guys and gals!
Conclusions
BOM
Midc – look like BPA, plus water will tighten after these very warm days. Now that BOM LL is trading sub $1.00 we’ll double our position there and buy back our HL shorts because we want to look like BPA
NP & SP & Palo – cooling weather versus a rallying BOM leaves us no choice but to short all three HLs, but we’ll wimp out and do it as long July-June rolls:
The SP is at a contract low, and there is no reason for this; the Palo can be explained by projected above normal temperatures and though the hub slips a bit for a few days temperatures rally next week – that said we’d still own the rolls as we expect cash to take a step back. MidC’s roll is also at a contract low, more off of BPA games than fundamental reality and we’ll own that one, too.
Looking at the APT rankings, the # 1 trade today is shorting the SP-MidC June LL spread:
But you do this trade you are not looking like BPA; the feds hate LL. LL is BPA’s WW1 infantry – it’s expendable. That said, physics is working in favor of owning the LL as the snow is disappearing much faster than what anyone expected and at some point, some shaping returns.
Here are the rest of the Top Ten Monthly APT trades for today:
Bear in mind; APT is a fade strategy which is a tactic not for the feint of heart.
The top ten Q trades:
