Good Morning,
To recap our quick fundy stroll, ugly across the WECC but more so in the north than Palo. California, sandwiched between the two, is more neutral, but more bearish than it was last week. Lingering in that state is the healthy hydro, we keep posting charts of the peak coming off, but let’s look closer at the average energy:
Statistics don’t lie, the guy compiling the table together can, and often does, all day long. By looking exclusively at peak seems cal hydro is falling hard. But look at average by hour type. The HL is off a scant 200 aMW, the LL about 100 aMW. At that pace, the state should be back to its 2013-16 levels sometime next June. The Min energy, as telling as the HL, is off but 75 MW while the LL was higher yesterday than two weeks ago … and peak loads were off about 10,000 MW.
Just wanted to point that out, we meant to include it in the earlier post, now we did … on to some term trading nuggets…
APT – Biggest Moves
This is our favorite table when looking at term markets because it highlights the rank changes; the first table are those “Rising” in ranks, meaning these trades are becoming more attractive (or if you have them on backward, more painful). The second table are the “Falling” stars; these are the trades that should be liquidated if you put them on when ranks were better.
We’ve broken Biggest Moves into Qs and Ms; the Months are above. The top table are rising in ranks; the bottom are plummeting.
Palo Oct On|Off
The new #1 biggest move upwards is the Palo Oct On|Off, and it is easy to see why. A contract high was set on Monday; then it slipped a bit. Part of LL’s problem in Palo are the gas units that are running 24/7:
As the hub’s demand craters it will begin dispatching these units and the off peak will lose a significant % of its generation. Look at the historical plots below (red lines). Both Griffith and New Harqualah will soon either cycle to zero or take the plants down.
Let’s look at APT history for more insight into how this beast has traded:
Note that the first strong was on Aug 25, ten days later the rec was ignore or hold – after it cratered 500 btus. Now its back to 1.99 and we’d be happy shorting this blunder.
NP-MidC Oct HL
Also easy to see why the spread is ranked #3 – it’s at a contract high and has rallied quite substantially over the last ten days. Last time the spread did the same it tanked.
Same date as the On|Off, Aug 25, the spread was the #1 rank, and the APT rec was Strong. Barely a week later it cratered 550 btus, now its back to no-mans land. Put us down for some of this one, even though the MidC is a pile of **(&((&, but so is NP. And MidC’s hydro is much more bullish than NPs.
NP Dec-Nov HL
This trade was pulled from the “Falling” list. Sometimes it is interesting to see why the ranks cratered. In this case, the roll hit a contract low, bounced hard ( a couple of times) and now its well off the low and lost its luster.
Enough of the months, let’s look at the Qs.
Mid-C OnOff HeatRate 2018-Q1
We skipped the first one because we are not using APT for Q3 2019, we need to work on the forecast some more for 2019. So next one is the MidC Q1-18 On|Off. For whatever reason, the deriv is taking off. What do we know different about Q1 2018 today that we didn’t know last week, or three weeks ago? Not a thing. Probably some short ute bought a couple of HL Qs and blew the ratio out. We’ll watch it.
SP-MidC Heavy Load HeatRate 2018-Q4
The Q4-18 spread blew out at the peak cash day back in August, ever since the market has paused to reconsider why it rallied a spread a year out, we didn’t bother to pause, APT just faded the move.
That said, we think there is more room to fall, like back to June levels, and would keep it on. Though we are entering Santa Anas and would be watching LA weather, if cash spreads blow back out, so shall this one.
These are the Biggest Moves, always worth taking a look at. We also like to look at the outright APT ranks, as well.
APT Top Ranks
The second one is more intriguing because it has realized a bigger rank change, but we already covered it, so let’s go to the next significant rank change, #5. NOTE – low “WOWs” imply nothing has changed and most likely we already discussed those in a previous post.
Palo Verde Light Load HeatRate 2017-12 To 2017-11
Either there is a major paradigm shift taking place at Palo and Dec has become a turd or the market’s thinking is the turd. We suggest the latter. The roll is an easy trade – resistance at -600 and support near flat, last few days its approaching -600.
The model has had a field day with this one, coming out with 3 Strongs and then flipping out at Moderate or Ignores.
SP-MidC Heavy Load HeatRate 2017-Q4
This spread has moved up 83 places since last week and is getting top heavy, at least to APT. Long run, we see value in the 1.80s, it’s trading at 2.28. What do we know about Q4? Maybe some late SP heat usually is, but the ISO is flush with hydro and renewables, and loads are going to tank over the next week. MidC? Average water and the hub is entering heating season, though BC has healthy reservoirs. Hey, just call the MidC an average year which is a 1.80 spread, not a 2.40.