APT – Front

Posted on by William Griswold

Good Morning, again,

ADMIN NOTE: CGS tripped yesterday, our scrape missed it timing wise for the blog. It seems there were some issues with a condenser as they vent pressure. As of now, it is 100% offline.

On Monday’s I look at the front and on Wednesday the back, though we are working on an automated APT report that will be released every day. APT Back Emailed Report will go out to only those who request it and will be built around our “Biggest Moves.” The front does not lend itself as well to an APT approach, so we will continue to manually create the blog.

Outrights

As usual, we’ll lead with the outrights but reserve an opinion til we examine the derivatives.

The market has corrected itself, violently, and the buys made last week got paid.

The South LL’s for BOM moved not, but the North, especially Mid-C, rocked, rolled, and soared. After looking at the cuts at Coulee yesterday, the loss of CGS, and some new NW heat, we’d think those LLs remain strong for the rest of the week.

Sep LLs are mostly sideways, though the MidC showed some love. Careful on that one, spill ends in ten days, and unless the heat extends, we’d expect some downward pressure as we approach BOM-expiry.

 HLs, for prompt, are up across the board, most likely in sympathy with cash. That trend will be hard to reverse if the cash rally extends, which it should if the heat arrives. If the heat extends, then Prompt may run all week.

On|Off Spreads

Whoops, where the market hated the bom on|offs late last week, now they love em.  We called the selloff a “blunder” last week, and it was, now the question to ask has the rally blundered in the other direction? Probably has, but we’d hold off on shorting to see how the market reacts to CGS going offline. Though liquidating spec length in the on: off would be the prudent strategy, imo.

The on|off has been jacked in every hub for Prompt and how we have contract highs at both Palo and SP15. Bear in mind, the ISO’s hydro energy is falling much faster in the LL hours than HL. Also consider Palo, where declining loads means less gas idling at night and crushing that market. Seems shorting the Palo at these lofty (and crazy) levels is called for. SP, too, but no point in doubling down, it’s basically the same trade.

Sell Sep PV HL, buy Sep PV LL

Rolls

Check out those reversals of the reversal and talk about volatility – either a spec guy’s wet dream or nightmare, depending on how strongly you embraced the myth of “trend is your friend”; we welcome “fading the trend is your friend” and did well; now, the market is mostly back to parity, and we’ll pass.

Similar story, not as volatile, and PV hasn’t reversed, it’s back to contract high. NP is near a high and SP is value, while the MidC seems cheap, but will probably get cheaper off of the CGS issue.

Next week we’ll drop Aug and call Sep our BOM and add Oct as Prompt; consider this roll our “early bird” look at Oct. Contract lows at Palo, which will have a nuke down for refueling the entire month. The other hubs are in a free-fall, not off of a change in Oct value but off of the Sep strength which is driven off of the Aug cash rally. We see these rolls as interesting entry points and will do:

  • Buy Palo Oct HL, Sell Palo Sep HL
  • Buy MidC Oct HL, Sell MidC Sep HL – of course, there is the DC out for Oct, but we also see a 1600 MW cut in the AC for the first ten days of Sep, so trans-wise, there isn’t that much difference.

The LL rolls are mostly at value, except for the NP which is at a contract low. We bought this last week and will buy it again this week.

  • Buy NP Oct LL, Sell NP Sep LL – more off of declining NP hydro than anything else, though it is cheap.

Spreads

The spread to MidC is crack cocaine. First, they were cheap, then rich, now either cheap or fair value. You still think the trend is a safe ride? The SP PV seems rich after last week’s rally, why not milk that cow again?

  • Buy PV BOM HL, Sell SP BOM HL

The Sep SP-PV is also rich, but we have it on in the BOM, pass. Nothing else is compelling.

The spreads to MidC are dirt cheap, but the hub has water issues and so might be fairly priced. We’ll hold off and see what cash does this week in light of CGS meltdowns.

The spreads in Sep to MidC are rich, and we’ll fade one of those given warm Northwest, no water, and CGS issues.

  • Sell Sep SP HL, Buy Sep MidC HL

Aside from the Sep SP-PV, seems these markets are fairly priced. We already did a piece of the spread and BOM and will pass.