APT – Front

Ansergy Recap Part Two …

Good Morning,

Now for the conclusions. We know it’s hot, water is tight, and cash is high and will, most likely, grow stronger. All of which will make Sept HL go bid. The cash spread between Socal and PG&E collapsed, and LA will be hotter than the north; plus the Northwest will probably not fill its lines, even with the TTC derate for the first ten days of Sep.

Let’s see what the market thinks …

Outrights

Forget BOM, its BOW now, so we’ll lead with Sept:

September

Crazy bullish, the market can’t get enough of Sept – everywhere. Typically you’d see one or two hubs rallying, but all are off to the races, and we don’t disagree. This week will be brutal across all load centers and the last half of the week will trade Sept as BOM.  That said, what goes up usually comes down, so when to short? Hah! We wouldn’t today, nor probably even consider shorting til Thurs-Friday, but need to study the Derivs before making that call.

Sept Off Peak

Just the MidC has seen an appreciable rally in the off-peak; Palo is sideways while the ISO sees a slight uptick, all of which has rendered the OnOff richer.

October HL

Poor Man’s Summer (September) is stealing all the thunder, poor Oct is rising, but much slower, which is to be expected, though the MidC has seen a tumble – huh? BPA will be drafting, not for dollars, but to keep the lights on this week all of which will create a hole in October. Fundamentally, bullish Sept has to be bullish Oct (at MidC), yet the market doesn’t think so.

October LL

Sideways to down, and starts looking cheap to these tired eyes. But let’s look at the Derivs for clarity.

On|Off Spreads

September

Crazy highs, every hub is at a contract high, though we don’t disagree at PV, SP, and NP given the nature of the intra-day demand curve. MidC, however, is a different story because of its hydro. We already saw Off peak trade over On last Friday; water is tight. That said, there may be more room for this to run up, and we’d pass on anything til we see how the markets handle 108 degrees in the LA Basin.

October

Interesting that all three southern hubs are trading the spread at contract highs, all off of sympathy to vast cash (August) spreads. The MidC isn’t, it has drifted off of a late spring blunder and now is back at value. Those former products are shortable today; there is no rhyme nor reason for Oct to blow out; these are just “trend=friend” sympatico moves.

Rolls

This week we dropped the Sep-Aug and added the Nov-Oct.

Oct to Sep HL

Shit, LOL, and falling knife. That said, knives cut and shorting today may require tourniquets and transfusions later in the week. We’ll pass, but our trigger fingers will hover over the ICE buy buttons.

Oct to Sep LL

Palo is back to value, the other three are in cheap land, but like the HL, we’d hold off and wait for a better entry point.

Nov to Oct HL

A bit more sanity further into the curve, though note the “support” the southern hubs have – all three bounced hard, twice, off of lows, yet all are still relatively cheap when compared to last year’s settles. The MidC has steadily become richer, but now it’s just at value.

Nov to Oct LL

Great fades ten days ago, all the southern hubs set contract highs than puked off of those, now they are marching back up and setting up for another fade.

Locational Spreads

Sept HL

Interesting, the SP-PV is at a new high and Phoenix is still posting 110s, and the line is about half full. The NP-SP has rallied hard off of lows but now is just about at value. The spreads to MidC are at highs, and MidC quit exporting and has run out of water. We’d be comfortable shorting if Burbank wasn’t 108 degrees; like everything else would wait and watch.

Sept LL

Aside from the SP-PV, the spreads seem relatively reasonable, though we think the anywhere to MidC is probably overpriced.

Oct HL

The anywhere to MidC spreads are setting contract highs. It’s not like everyone woke up this morning and collectively said: “OMG, the DC is down in Oct.” That is old news, like a year old news, so what has changed in the last two months? Oh yeah, the ISO has some bullish July and August days, which changes everything for October. LOL, Yours!

Oct LL

LL is a more rational market, and nothing looks that interesting, at least relative to all of the above.