WECC Update – Part Two of Two

Good Morning,

I’ll conclude the day’s post by looking at some markets.

Today, we scrambled SP and MidC and are looking at just the April and in bullets. Let’s get after it.

This spread, April SP-MidC, is cheap and should be owned. All of these comments, today, are through the lens of an early return to full Westcoast capacity. Though MidC is in a draught and its TDA water supply is 87% as of Friday, we don’t believe any of that and are waiting for that one big storm to put the hub back to normal. Toss in real problems at Socal and perhaps no problems at Sumas, and you have a recipe for wide spreads. We’d buy this one.

Here’s a roll, March to Feb at SP, and we’d be tempted to buy this, except it is at the wrong hub. There are no fundamentals suggesting these rolls are miss-priced at SP, just at MidC. The fear is LA gets cold, like a 30 handle for a low and it lasts a week or two. With imports constrained and Aliso neutered, LA can’t serve load and spot soars. Odds of that are higher in Jan-Feb than March, hence the $20 premium. Pass.

The Feb spread and we think it is cheap, too. Feb has a better chance of big water than Dec or Jan because it can receive boosts from flood control; doubt we see big drafts if water supply remains an 80 handle, but still don’t believe it will.  The opportunity for going long the spreads arises If Enbridge restores Westcoast to 100%, then all of those MidC premiums go “poof” and are gone.

The March might be a better place to buy the spread given that the odds of a full restoration of WEI capacity are greater later than earlier.

This a pure gas play; if you think WEI goes to 100% before the end of Jan, sell this; if not, sell it off of warm weather.

Lower price, lower upside, higher odds of a win. Sell it, too.

These On|Offs blew out and will blow down should gas issues be resolved. This is March, sell it.

Want to buy something at MidC. All the rolls are fair targets, this one especially so since it is so far into the curve.

Jan’s now prompt and will get very volatile; we’d buy all the rolls, especially this one.