Fundy Thursday

Posted on by William Griswold

Good Morning,

William is absent; Mike is going to take a shot at doing a Thursday update. Today, we’ll wander through a few fundy’s that caught my eye, there are some nuggets out there, though it takes some patience to find them.

Demand

Let’s jump right to weather forecasts:

Hot today, gone tomorrow; check out that string of below normals at Seattle. Nothing like a morning chill to get the kiddies to start thinking about school, and to get traders to start thinking about puking their MidC length.

Oooh, more blue circles. Burbank has more days below normal than above, and none of the other CA cities look too promising.

Red! Phoenix refuses to relinquish summer, just yet, as another blast of heat bakes the Sun City next week.

We already know it has been hot, but actual temps show us exactly how hot it’s been and only emphasize how cool it’s going to be. Seattle highs in the low 70s, maybe high 60s – from 89. Loads will plummet in the Northwest, further than any other hub.

Already seeing reality set in for the MId-C; where yesterday the hub traded premium to everywhere, it is now lagging the ISO  by $6.00, though it’s still the gold standard heat rate hub, in both on and off peak. SP cleared over NP, but not on heat rate. All of these are coming off, though PV less than the others – might be a good time to think about selling those term SP|PVs?

Generation

Another kick in the proverbial knapsack; gas outages are falling fast and furious. How much of that cash strength arose from an extra 3K of low heat rate gas units off line – that aren’t now?

Only one new outage, three that returned. For the record, all the nukes are running at 100%. The glass half-fullers would point out that there is only one direction for outages to go when everything is running, and they’d be right, but we’d rather bet on certainties and less so on wishes, dreams, hopes, and fantasies. Bullish because you’re long, or bullish because fundies support that sentiment? Always a good question to ask.

Noms remain summer-strong but expect those to take a tumble later next week, or sooner.

In these plots, we are looking at the last fourteen days by fundamental. Let’s recap:

  • Demand – down
  • Thermals – down
  • Imports – down
  • Renewables – sideways
  • Hydro – down

Now let’s take the same plots and look at historicals (last five years):

  • Demand – down, both the min and max are lower than 2013
  • Imports – trending down, maybe Kalistan is finally going to start serving its own loads?
  • Wind – up slightly
  • Solar – up big
  • Hydro – up big, but not because of new capacity; WY17 was one for the record books

Aside from imports, every long term fundy is bearish. Food for thought.

The ISO hit 14-day highs in the last couple of days while the MidC wind turbines collected cobwebs. That latter hub’s dearth of renewables helps explain some of those 19k heat rates; with the high-pressure system breaking down you can count on wind energy breaking bad as in rallying next week.

Hydro

Here’s a twist, we’ll lead with a Precip Forecast:

Seattle is poised to receive its first measurable rain in two months, and it needs it; the smoke from the BC fires has obscured our beautiful views, though it has made for some stunning sunsets. Phoenix, too, is going to get washed with nearly 2″ of monsoon rains. All that will do is temper demand and ruin some camping trips, and the Seattle rains will just help the golf balls stick to the greens on your approach shots.

Coulee hit a season low for discharge, barely mustering 20kcfs on a couple of hours yesterday. Meanwhile, the pond has rallied which may become mildly problematic for BPA with declining loads and a decaying calendar. A typical target for Labor Day is around 1278′, the pond is at 1285′, leaving 7′ feet of draft for some time in the next 21 days. Maybe not a very big deal, however it is a fact and a bearish one at that.

We’re surprised they let the reservoir fill this week given the expected softening in demand for the rest of the month. It’s not like BPA ran at hydraulic capacity when real-time heat rates were in the 30ks. Now they can run harder when heat rates are 10k, go figure.

Nearly the entire MidC is running its hydro below average – red triangles. That won’t change for a while, but the spill is set to expire on August 31. We’d expect this to have more impact on the off peak than the on.

Arrow continues to draft to support Coulee, but Mica is barely registering all the while the Peace is the swing resource. Flows at the border are near lows.

A study in contrasts, blue triangles are above average discharge, and Cally has mostly blues. Note the changes on the Cherry Creek complex, a 50% cut in discharge in a day, and most other projects are trending down.

BC averages about 1500 aMW of exports to MidC, both the DC and AC are exporting less than capacity, and energy is mostly north-bound out of ZP.

Conclusions

It’s hard to get excited about anything, but trading is relative, and the front has come off hard:

These tables look at changes from yesterday versus a week ago for BOM and Prompt. BOM has been collapsing while the Prompt is mostly sideways, rendering long Prompt: BOM rolls a home run. The ISO fell harder than both MidC and Palo giving those short spreads a nice win. The off rolls got paid a bit (short-side) while shorting the On|Off also hit one out of the park.

It’s Thursday, we don’t make market calls today, plus we liquidated our BOM positions (mostly) yesterday and will wait til Monday to decide if we want to wade back in. For now, we just see red and would be wary of major positions without more downward market moves. Though these periods of cash transition (high to moderate or weak) are harbingers of term corrections and that is where we’d be playing today.