Good Morning,

Today we’ll crawl the SP HL front-end curve out through Sep 2019. Our fundy takeaway was a bit bearish because of the lingering west coast heat, but soon that heat will be bullish, not bearish. Given the recent trends, we should start seeing cooling degree days in Feb. Overlaying that interesting weather outlook is the dark cloud of Socal Gas. Will the LDC finally send its crews out into the harsh desert and fix a broken pipe, one that blew up two and half years ago? Or will they stay in the smoke shack sipping coffee and munching donuts for another decade or so? That is the question de jour; we think they start fixing things.

Today’s Blog Fodder

In table order …………..

BOM’s really BOW, as in Bow Wow; it’s been a dog, still is a dog, and that weather forecast isn’t warm enough to trigger much cooling load. Doubt we see it tank either but have no compelling desire to be long or short.

Prompt staged a nice rally, both PP and HR, yet remains on the cheapish side of things. Given our tight water outlook up north, at MidC, and a slight chance of some CDDs, we’d buy this.

The roll has rallied hard, PP-wise, while the HR is cheap. We already said we’d buy Feb and pass on Jan and would pass on the roll, too.

March is cheap both HR and PP; each is beneath the forecast. I like cheap, who doesn’t ……..BUY

HR is cheap; the price isn’t so much. I’d be long both and forget about the roll.

April, unlike Feb and March, never sold off; if anything it rallied, which is odd because that is when the first piece of the Socal imports, 600 MMCF, should be restored. Let’s look at the roll.

The roll is near a contract high for PP and close with HR. Of course, weather is warmer in April than March, but our play would be gas and odds of “hot” in April are low. Plus, we potentially could see some bitter cold in March, both in the Northwest and Cal; but at neither in April. I’d short this roll.

May isn’t cheap, either. Those hefty Socal Citygate premiums linger in this bullet. To the roll for clarity …….

The roll is cheap, though the HR just went nuts and rallied. I guess the thinking here is that 600 MMCF of import capacity is restored in May but not in April. But it wouldn’t take that many CDDs to absorb the new gas, and what if the capacity doesn’t come back? This roll seems anomalous; we’d buy it.

This isn’t cheap, the heat rate was cheap a few weeks ago, it isn’t any longer, yet both PP and HR are beneath the forecast. To the roll…….

Both HR and PP sold off, but each remains rich. The odds of a restoration of import capacity are higher in June than May, but June will also be hotter and less likely to carry any melt-driven hydro.  I’d be more inclined to fade the recent sell-off and buy the roll.

This is the lottery ticket, the widow or hero maker. The hope of the longs is $40 Socal Citygate prices and the LMPs clear in the $300s for several days. Now is a great time to jump in if you honestly believe that could happen, prices haven’t been this low since October. Heat rates have NEVER been this cheap. That said, I’d be paranoid of the gas side of the equation. I guess the question to ask and answer is “Could SP blow up even if all its gas import capacity is restored? Could it be hot enough or enough outages or weak northwest hydro to drive high prices?” Of course, it could, but I wouldn’t go long just yet, the trend is down, and I see no cash event to change that, at least not in the next 14 days. PASS

The roll is cheaper but not cheap. Pass

Like July, I think there is more room for summer to sell down and wouldn’t want to be wearing that potential pain … PASS

Shyte, are those marks right? The PP and HR soared, and we’d short it.

Poor Man’s Summer, Sep is, and its even more comfortable to own today than ever. We’d own those heat rates all day long; remember, if Citygate goes back to normal so do heat rates and owning Sept at 11k sound cheap. BUY

Wow, the rolls are too cheap to meter …………….BUY

 

Good Morning,

Paint drying, watching it that is, is what the mid-January WECC markets are like. Weather is stuck in a warm, dry pattern; all the action is to the east of us where it’s bitter cold. But this extended dry will impact our markets but, like paint drying, it may take a while.

NOAA gives LA 14 days of beautiful and sunny weather. No gas issues there, perhaps that is why Socal Citygate’s spot price settled beneath PG&E for the first time in recent memory?

Even as Sumas continues its free fall to $2.00, the spread against Citygate collapsed on Friday – most likely off of very weak demand. Another takeaway from the above table – note how tight all the basis are to one another. Contrast the current flat spreads to October and November.

That’s a dry 6-10 day, on Saturday it was a dry 6-14 day. Mostly, the WECC reverts to normal around day 10, which is far enough into the calendar to give us low confidence.  Fortunately, the WECC got hit pretty hard over the last week, and SWE anomalies rallied:

Ansergy’s MidC index is back to 88%, and the California indexes are well above 100%.  Those latter ensure an extended runoff, we just don’t know when, though given a warm bias we’d expect April and May to bear the brunt of the unregulated inflows.

BOM pulled back, rather sharply, but why wouldn’t it when the weather forecasts pulled back even more?  Now we can cover all of BOM with the 6-10 day and it is ugly.

NOAA 6-10 Day – Wednesday

.

That’s what we knew as of Thursday morning; then the outlooks just grew more bearish for WECC while more bullish for PJM and its brethren. Oh well, you’d expect the sell-off to continue in a thermal system, but the WECC has hydro, lots of it, and water is tight, or tightish. So not sure you see everything collapse.

Prompt didn’t pull back like BOM; I guess because the back of the forecast wasn’t as bearish and we have less confidence in it. One of the weather gurus on that Enelyst chat board got all hot and bothered over the 30 day, or maybe it was a 90 day, cold outlook. I could only laugh. Trade off of those extended forecasts if you are looking for a new career.

LMPs are weaker than not but more telling is the lack of spreads between any of them. Even Palo tightened up to SP.

Both Socal and PG&E are drawing hard on their storage, especially the latter. It’s almost like they know Socal will restore its import capacity and summer refills won’t be a problem. Just a guess, but Socal repairs remain the WECC’s biggest summer wildcard. At this point, if I were to bet, I’d guess they restore 600 MMCF by mid-April and another 400 MMCF by June. Should that come to fruition, we could see another significant selloff across the WECC. There are still massive Socal Citygate premiums embedded in every roll, outright, on/off, and location spread. All of those will dissipate, just like they did when the Sumas capacity was restored.

Adding to the Northwest’s woes are these big drafts at Jackson Prairie. Gas demand is soft, but now Puget has a new problem – too much gas. They husbanded the storage to prepare for a Winter Armageddon that never arrived; now they are puking it out to make room for the summer injection season.

The storage project is between 300 to 500 MMCF fuller today than any time in the last six years. Does that mean there will be 500 MMCF less room for injections this summer? That’s a fair amount of gas sloshing around the MidC trying to find a home and Sumas will be back to chasing $1.00 handles.

Not much to add to that chart, the arrows say it all. Loads are abysmal.

This report looks at changes in the weather forecast, todays versus three days earlier. The front is quite stable at all four traded hubs, but the back has San Jose and Portland warmer and Phoenix cooler. 

Gas noms for power plants are off in the ISO and up at the MidC; the latter us up because the Sumas power plants are back to running, they weren’t in Oct and Nov.

Gas outages in the ISO are up since the start of the new year; the late winter outage season has begun. Not that it matters, there is plenty of idle capacity when Burbank settles in the 70s.

Renewables are up in the ISO; they were down because it rained hard and cut the solar. The wind at the MidC increased but remains well below average.

Prices are up, week-on-week, at the MidC because hydro and wind are down, not because demand is up, it isn’t.  Check out those year-on-year hydro numbers (2nd table); crazy tight right now.

ISO’s loads are way off, year-on-year, and imports are up. I like these tables; they summarize the fundies in an easy to see perspective.

BPA cut power at Coulee, week-on-week. Yesterday’s average output was the lowest in weeks. Maybe the STP is right and Feb and March will be the tightest in years?

What Coulee giveth, lower mainstem taketh. Flows across the latter were down.

Inflows at the international border are well-below normal, in fact, all six guages above Coulee are below average. Worse, there isn’t any low-level snow to melt; nothing to fuel natural river flows in Feb and March.

Snow  Cover – Jan 20, 2019

Snow  Cover – Jan 20, 2018

Snow  Cover – Jan 20, 2017

You see the difference, especially against 2017 versus 2019. There just isn’t much to melt below 4000 feet which is the range that drives the season’s first freshet. This year, there may not be a “first freshet”; at least that is what appears to be driving the very tight STP Feb-March outlooks.

At least the Northwest reservoirs are mostly full; the biggest hole in the Columbia are at Mica, and we’ll argue its storage matters the least. That massive reservoir can hold multiple years of water, while everywhere else is on annual cycles that can’t vary. And besides, the swing in discharge at Mica is not very big, like around 15 kcfs.

Average peak discharge at Mica is about 18000; max discharge is maybe 30 kcfs, leaving around a 12kcfs swing. The Spokane River has more volatility than that which is why we suggest the hole at Mica is not going to be a major MidC driver.

All that rain has forced most of the primary storage projects in California to release water; we suspect some of that water is spilled given that the ISO’s hydro energy is not moving up.

It’s Monday, time to play the STP whack a mole game. Which month gets bumped, which gets cut?

Hard to see how the NWRFC could cut either Feb or March any more than they already did. If anything, they might raise both if the Corps elects to do more drumgate work this spring. Should that be the decision, then Coulee must be pulled to 1255′ by March 15 and we suspect there will be little to no flood control draft. So, if the STP doesn’t soon bump Feb and March, we can conclude there won’t be drumgate work.

As the Northwest gets longer, more energy flows northward. Flows into SP on the NOB are off and the AC remains derated.

Conclusions

Weather is bearish, but Northwest hydro is tight. It appears the plays are more in the backend of the water year than the front. Cash is not going to change much off of this forecast, but the dry weather makes the spring ever tighter. More on that in a post to follow.

Good Morning,

Our fundy walk left us a shade bullish;  both from colder short-term weather and a tighter water year. Today, we’ll look at some Qs that jumped out of the APT table.

These are in no particular order.

Palo’s On|Off spread for Q3 has been tanking, more off of the HL falling than the LL rallying. Both PP and HR are now at or near the forecast values suggesting a possible buy. Our summer fear from length is a full return of Socal’s import capacity; should that happen, this spread will continue collapsing and if it doesn’t, going long here is like owning a summer call.

This is another On|Off; this one is at NP15 for Q4. Like the Palo, it has come off over the last couple of weeks. Sell it if you are bearish, we’re bullish and would buy.

Even the mighty SP15 Q3 has sold down, possibly off of the market expecting some increase in Socal’s import capacity.  Still, it is looking like a dry year and probably another hot one, after all, most of the recent years have been warmer than usual. Time to buy this? I’d be tempted.

The above plots are the year-on-year Q2 MidC roll; it’s trading negative (backward dated) because the market expects the nearer in Q to trade at a premium. That is a correct assumption given what we know about this water year (it’s dry) and what we don’t know about 2020. PASS.

The above is the same derivative but at SP15. That plunging heat rate caught our eye; this has fallen nearly 2000 BTUs in a week. It seems the market expects the Socal issues to be mostly resolved by next year and it also seems this consensus was just recently reached. We checked Socal’s maintenance schedule and didn’t take note of any news, but someone out there seems to know something.

Here’s the locational spread between SP and MidC for Q3 and the market has sold this down, too. It is hard to disagree with that direction given the ever-drying out in the Northwest and the chance that SP’s gas import capacity gets bumped a B.

This one is cheap, both HR and PP. The fear is a blow-out summer that doesn’t impact Q4, which it won’t, it rarely ever does. If you were bearish summer, this would be a buy, but we’re more bullish than bearish.

Lots of bearish charts but here’s one with a big rally, both HR and PP – the Q1|Q4 roll at NP. I’m not sure what the thinking here is, aside from buying contract lows. I’d be inclined to fade the rally and sell it.

The SP Q4|Q3 roll has also staged its own mini-rally; all of this is connected, the market is growing pessimistic on big summer prices, probably from diminishing gas concerns.

The Q3|Q2 NP roll has tanked, too. All of these big moves began a few weeks earlier, at the start of the New Year. I like buying this since you get long summer at spring’s expense. I also like being short the Q2 as California will have a runoff this year, all of that will come down in Q2.

Good Morning,

Fundies are growing tighter; the temps are dropping and the rain is evaporating and the markets staged a small rally, both gas and power.

Bom bounced off of six-month lows but seems to have stalled; we think there is room to continue moving up.

Prompt rallied harder and didn’t take a pause; we think it keeps going up off of falling temperatures and an overall drying out.

The Socal Citygate | Sumas spread tightened up nearly a $1.00; both are up though Sumas has rallied almost $1.50 in a week. Some of Sumas rally might be explained by wildly fluctuating inflows at the border:

Tuesday’s flows hit a 30-day low, but that was short-lived as yesterday’s exceeded that 30-day average. Most of these oscillations were scheduled; Enbridge is testing pressures in expectation of a return to full pressure soon.

While the east coast has turned bitter cold the west is colder, especially outside of the ISO. The Cal coastal cities are clinging to above average, but as we discussed on Monday, the cold has shifted west and grown in intensity; this isn’t “cold” per se but is much cooler than Monday’s outlook and way colder than last week’s.

NOAA 8 to 14 Day – Jan 9

The markets should have rallied off of that implied change in demand, but there is another fundy that is taking the WECC on a more bullish turn – that is the hydro outlook.

All of the west is bone dry; that’s what high-pressure systems do, they block out the storms. This outlook takes us through what’s left of January and gets us also past the half-way mark in the water year.

On average, by Feb 1, we’ve realized 52% of our precip for the snow year; Ansergy defines April 15 as the end of the snow year. Some would argue it is earlier than that since all Flood Control drafts are in place by the end of March.

The average of all the gauges at MidC are now at 80% of normal, as of yesterday, having dropped 10% in a moderately wet week; should NOAA’s forecast hold, we’ll be sporting a 70 handle with half the year over. Dry years tend to drive early runoffs that are short-lived; they also are of shorter duration with little draft.

If you assume a water supply in the low 80s or high 70s, you can plan on little or no draft at Coulee. Three of the four design years had no draft; the Coulee target was over 1280′, a higher elevation than today. That’s interesting since it means very little regulated water in Feb-April and don’t expect any low-elevation snowmelt surges; there isn’t low-level snow.

Though we aren’t at a low 80 yet, the NWRFC has the Apr-Aug TDA at 90% as of today, but this very dry forecast during a period that is typically very wet will pull down that number. Point of all this snow chat is that the outlook is growing more bullish with every dry day.

Loads were up at three of the four hubs, all but Palo; the forecast for temperatures will drive next week’s loads higher.

Another source of bullishness has been the weak renewables, both wind and solar. The Northwest hasn’t had any wind energy for nearly a week and the ISO solar tanked over the last couple of days; of course, cash would tighten.

Coulee’s discharge has fallen, week-on-week.

Several of the BC Hydro stations are falling; most are below normal.

California is realizing a bit different scenario; regulated discharge at several of the dams soared the last couple of days.

Meanwhile, the NWRFC’s Ten-Day outlook is once again all over the map. Big cuts in Bal week and a rally of sorts next week; perhaps that latter is driven by BPA’s expectation of higher loads?

The Northern Intertie flowed energy into the MidC for the last four days, but today its back to importing into Canada. The AC remains derated as does the IPP line.

Conclusions

We were bullish last week, we were bullish on Monday and looked like we got paid. Usually, I’d take profits, but there is nothing in this outlook that isn’t bullish, we’d stay long the front, both the ISO and the outside hubs.

Good Morning,

We left the fundies bearish in the front but it is all relative to not just supply and demand but also price. Today we’ll examine the MidC curve through September, just onpeak; one of these days we’ll look at the off but today isn’t one of those days. On Thursday, we’ll do SP15.

As usual, we’ll work off of the APT tables; this one was filtered for MidC months, HL, and outrights and rolls.

We’ll present in table order, starting with BOM.

First, a word on the forecast. It is overly bullish in my opinion and driven by a tight hydro forecast which is driven by an insanely tight STP forecast. We aren’t willing to abandon the STP, but just want to point out why the forecast is so strong. The dilemma of using STP or Ansergy’s forecast is historically an ongoing debate. Since the market uses STP, we elect to do the same.

Caveats aside, BOM is cheap historically for both Power Price (PP) and Heat Rate (HR). Fundies are bad so it should be cheap and there is more gas to be added at Sumas, though not much more. Still, this is cheap, and the market concurred on Friday. With a dearth of realized wind (both ISO and BPA) over the weekend we might see cash firm; if so, owning this might be like a cheap call, but doubt it rallies much, if at all. Still, at these current levels, I’d own it, like one piece at best.

Prompt is the same chart and the same fundies, mostly. One solid bullish fundy is that it has been warm in the forecasts for two weeks. What is the opposite of warm? Cold, and weather seems to oscillate in weekly cycles; now that NOAA has painted the mid-west and east cold, perhaps that system slides west as it has in the last two cold events? At these cheap levels, a long position might pay. If you’re willing to eat a few bucks, you can own the cheap call. Plus, we like that there will be little draft and no low-elevation snowmelt. LONG

The roll is richish PP and cheapish HR. The forecast prefers the Prompt over the BOM, but that’s because of how the NWRFC sees it in their STP.

Last week’s forecast put 1800 aMW more water in Jan than Feb, no wonder the model prefers the latter. But what strikes me, even more, is when you compare the Feb to prior years:

They have it as one of the lowest Febs on record, but the SWE anomalies don’t support that, nor does the 6-14 day forecast. The risk of going long off their forecast is they change their forecast, and the 8-week trend has been to jack the front and keep the back tight. But, we’re long both BOM and Prompt so will ignore the roll and its Feb bias.

Ignore the forecast; it is driven by STP which is 12,000 aMW lower than last year’s forecast for the same week:

12000 MWs! Compare this year to the previous four-year average the delta is still around 7000 MWs. We’ve caveated our forecast enough, let’s focus on the market, and it is cheap, way cheaper than modeled by the NWRFC. What if the feds are right? What if this is the third tightest March in the last 20 years? Long ain’t wrong until it is. BUY

The forecast heat rate on the roll is plunging while the market is soaring and is now approaching contract highs. If there will be a cold-induced MidC rally it will more likely happen in Feb than March; if there is a catastrophic early melt, it will more likely happen in March than Feb. If the Corps orders drum gate work the draft will be in late Feb and early March, not early Feb. SHORT this roll.

April isn’t cheap; it is just cheaper. If you get long Bom and Prompt, I’d be nervous about being too long anywhere else. We know nothing about the timing of melt, though we do know there will be minimal April draft and same is true for low-level snowmelt. If I had no other position, I’d own this too.

The roll is priced at historical average levels, though the forecast is massively biased towards the March. Trading the roll given our directions in the outrights would just clutter up the book…PASS

The market is starting to like the May, that’s a nice rally over the last week. It is too early to trade timing, and there aren’t prominent anomalies here … PASS

A low draft means an equally low refill. If spring is cold, any melt will be deferred into May-June and April might be the play. That’s what the forecast is thinking; we are leaning that way, too.

The market sold down while the SWE anomalies plummetted, just the opposite of what should have happened. The Market-Forecast delta is now at a four-month low, that is a buy signal. Plus, I like the Socal Citygate call option embedded in long June MidC. If water is tight and gas is on the margin, which it most likely will be, and Citygate blows up because Burbank hits 100, and the pipe fixes aren’t in place – lots of ifs, right? – this is a must own.

Now the market is liking the May more than the June, relatively speaking, and we disagree, somewhat. At these new levels, I’d buy this.

July hasn’t budged, much, while the rest of the MidC curve sold down. Let’s look at the roll before drawing our conclusions.

Not cheap in HR or PP. The problem with selling this is it’s a dry year, and both might be tight. Shorting would leave you exposed to a hot July, though if Socal fixes its problems in April, like they claim they’ll do, any embedded Citygate blowout premiums will melt away as those Westcoast Pipeline ones so recently did.

August isn’t cheap, it is rich, in every sense of the word. Too far out in the curve to care about in mid-January. Pass.

I do care about this in a dry year. The chances of snow-melt in July are low meaning the two bullets should trade closer to flat; this roll is rich HR and PP, and we’d short it.

Sep’s slipped and priced more reasonably than not. PASS

Good Morning,

It is nice to be back on a regular schedule, sometimes. The markets are back on schedule, very bearish in Winter with hopes of screaming high summer prices. Right now, we only see weakness, though the front of the curve found a bottom late last week after a torrid four-week slide:

Not much of a bottom, but after the Holiday Selloff it seems significant. That was an epic bear market, and much of the reversal was driven by an early restoration of Westcoast’s pipeline operational capacity. Here is are the posts for imports into Huntingdon from last year and the most recent.

January 1, 2018

January 15, 2019

Last year, the Huntingdon Area delivery capacity was just 162 GJ higher than today; in other words, the Westcoast debacle is one for the history books.

The spot gas markets reflect the overall weakness; Socal Citygate is off $3.00 in ten days, and now PG&E Citygate is trading just $0.80 beneath.

The west’s gas demand is off hard in the Southwest and just weak everywhere else, driven by warm and wet weather – both realized and projected.

Sunday’s NOAA made a bullish turn for the mid-west and east coasts; the load-center WECC remains mired in above average temperatures, though this forecast was cooler than Friday or Saturday’s.

It isn’t as wet, either. California goes dry while the Northwest stays above normal through the 14-day outlook, though Sunday’s forecast was dryer for both than Friday’s.  But warm only means snow in the higher elevation which leaves the lower levels snowless in January. A few years earlier we wrote of low-level  snow, and its big impact on Feb March flows; this year is just the opposite, very little low-level snow, which is the first to melt, all of which suggests weaker natural river flows in March and April since it takes much warmer temperatures to melt the higher elevation snowpack. Toss in a very low draft, and maybe there is a sleeper buy out there?

Jackson Prairie is finally pulling gas and seems to be working with Mist. Where Mist drew down its gas throughout the Westcoast pipeline constraints, Jackson did nothing. Now it seems the operators are pulling gas, even when it isn’t needed. Call it gas lending, JP draws, and Mist fills, but doubt Mist needs to put much more back in, not given current weather outlooks.

Aside from weak overall prices, the only thing that jumps out of these four plots is the massive Palo congestion to SP — not seeing any of that at COB or NOB, or congestion pricing between SP and NP. Not surprised at the latter, not given the $3.00 collapse in the two citygate cash spreads.

Power loads are off, except at MidC which saw a slight bump, week-on-week. A rally off of a very warm day last week. Yesterday, in Seattle, it was sunny and warm, one could have played a round of golf.

We know it is warm per NOAA, here is the hourly version. The forecasts in Burbank grew a shade cooler in days 7-10, warmer at San Jose, colder in Phoenix and warmer in Portland. Nowhere is it cold, no sign of a demand-driven rally.

It is almost the middle of the month and time for a degree day recap, month-to-date. I would have guessed all cities were behind average and would be wrong; instead, half the stations have positive anomalies, half negative. The south positive, the north negative.

SP15’s gas noms are off, NP’s sideways as is Palo’s, and the MidC’s have rallied but only because the I-5 turbines are now burning that cheap Sumas gas.

NP and MidC were becalmed the last few days, and the ISO’s solar has mostly recovered from the rain which pounded that fair state.

The top two tables summarize the MidC on a week-on-week basis while the bottom two are the same, but year-on-year. Both hydro and thermal are up versus three weeks earlier yet each is lower when compared to 2017 or 2018.

A similar report, this is for the ISO. The top table is the year-on-year, and the bottom is the week-on-week. The dashboard has the LL if you want to see it. Loads and thermal are off when compared to any of the previous six years, while imports are up; hydro is up compared to the 2013-15 periods and off slightly from 2017-18.

California’s water supply is up in the north and down in the south; the latest storms had a northerly bias. Still, the state is in an average water year which is anormal given the ten-year drought and suggests sometime between April and June a runoff-driven surge of hydro will be realized, and it won’t be just a few days.

The MidC SWE index has fallen 13% in two weeks; Idaho’s is off 5%, and now the Spud State sits at a scanty 75%.

DIscharge at Coulee is up and camped within the historical range:

After several wet years, the MidC is about 10% behind 2017-18 and lends a bullish feel for how the runoff may play out.

Discharge below Williston (Peace) is up and not sure why? BC loads are sideways to low and the ute is not exporting to the USA.

The storage (water) outlook has brightened, the MidC’s aggregate reservoirs are converging back to normal after lagging as much as a MAF; BC’s remain below average and California is above.

Today is the STP and we look to the 10-day for a tell and we get none; expect another random forecast. The front of Friday’s 10-day is bearish and seems it’s a case of render to Paul to pay Peter.

A few tweaks to the COB TTC; both uprates.

The Northern Intertie has grown dormant, nothing flow north or south. The DC has been full but is off, week-on-week; so is the COB but that’s because of the TTC derates. The IPP line is amidst a big derate rendering PacEast long.

Conclusions

Nothing bullish except cheap term prices. Given a bounce (dead cat?) on Friday, perhaps it is a sign to go long? Hydro-wise we’d be long-biased, even in the ISO, but we’re months away from seeing melt-driven streamflows. Now it is all about regulation and timing, so we fall back to the tried and true – fade anomalies. More on that in the next post.

Good Morning,

Sometimes it is good to be random; today we are posting on a handful of trades that caught our eye using Ansergy’s APT tool. These were culled by sorting on either Rank or WoW (Week on Week change in Rank). There is no order to the following.

Prompt month Palo Off-peak and it is nearly back to its pre-Sumas levels, not that a Palo bullet should have been impacted by that far-removed gas hub but it appears it did. The heat rate is trading at its one year average, but the power price is still over that same level. Given weak fundies, we’d… SELL

This is the NP On|Off spread for August. Unlike everything else, this has never backed down and has been on a bull run since last March. Though this is NP, you are betting on Socal Citygate having supply problems next summer. You’d buy this if you thought those problems would persist into next summer. Otherwise, this looks like a free short.  The trend of late has been to come off; we’d hop on that train and SELL

If we had a Rank for liquidity this would be close to the last – the Palo|MidC Q1 Offpeak. Not even sure you could find a market on any one of the legs, let alone trade it as a spread.  But this is like Fantasy Football, who cares! This was so cheap a week ago, look how the market has soared towards the more rational forecast. It is low price and heatrate; we’re big BUYERS

Let’s roll into a roll, the SP Aug|Sep in this instance. I love those step functions at a price, it kind of tells on ICE/Platts and how they derive their end of day settlements, right? But let’s assume those market prices are executable and we can conclude the roll is cheapish. It is priced the way it is because of how it settled last year. That is always a mistake to assume last year will be this year. LA is a late bloomer, summer heat-wise, and August has typically more CDDs than July. Last year was the anomaly, so we’d BUY this bad boy.

We’re still rolling with these rolls; this one is the Palo Sep|Aug and it’s too cheap to meter. Huh? This is crazy but just speaks to how the market has bid up the July and August leaving the poor man’s summer in the dust. I’d buy this all day long and hope and pray those Socal pipe monkeys actually fix their problems by July.

This isn’t cheap, the June|May NP roll, but it is starting to slide back to reality. As California’s water year builds the June should grow more bearish, the bet here (if you buy this) is early heat and problems in Socal with its gas. You’re hoping for double-digit citygate prices and SP pulling imports from everywhere. Not sure that is a guarantee, and we like fading anomalies, especially when the trend is in correction mode like it is here. SELL

Same trade as the roll, this is just the June bullet, and it is richly priced – sell it.

BOM NP is cheap, too, both HR and PP. So cheap you should buy? Hold on, cowboy, we didn’t say that. Still, it would be tempting to own this if only weather would support the position, but it doesn’t. Still, what’s the point of shorting something that most likely has little juice left in the tank? I’d buy this just to look busy, doubt you’d lose much.

Here’s another one of those highly liquid opportunities, the Palo October On|Off. Not sure how this made it into the daily screen, there is little to be said and less opportunity. PASS

You need to trade something to keep your job, right? No one wants a trader that doesn’t trade, so here you go, the March SP On|Off. YOu can buy this one for size and own a call option on Burbank HDDs. If it gets cold anytime in the next six weeks, you’ll make $5.00.

Good Morning,

Let’s start with the weather …

You can’t paint a more bearish picture for the WECC; all the load-center cities are above average in this outlook. Maybe it’s dry?

Maybe not; the storms from earlier this week shifted north, now NOAA has both its mid-term outlooks wet at the MidC and California. Wet and warm, hardly a recipe for a cash rally,  right?

Gas certainly hasn’t; Citygate plummetted about 30%, now its in the lower 5s; check out the Sumas|Stanfield spread, Stanfield is over by $0.20, and Sumas is about to sport a $2.00 handle; wouldn’t be surprised if it tests the $1 handle before spring has sprung.

BOM is bombing, prices extended their slide, and the shorts are getting paid.

Prompt promptly followed bom downward, though appears the curve is starting to flatten out; if only something, fundamentally, was bullish.  I looked, didn’t find it.

Wait, there is something bullish – congestion. Palo is congesting to SP; NP is trading premium to SP on many hours and same at the MidC on either the NOB or COB. But that, congestion, isn’t a measure of bullishness, more a measure of how bearish everywhere is.

Check out those line loadings at Malin500 and the NOB, nearly full every hour. Now the AC’s TTC has been cut; more energy is stranded in the Northwest. Even with cheap energy, exports to Canada are off.

Gas demand has dropped to a warm winter level and will remain there until the forecasts turn blue.

Palo’s power loads fell the hardest of the four traded WECC hubs, but MidC’s weren’t too far behind.

The hourly temperature forecasts beyond the NWS 7-day period are colder than they were three days earlier, but those are not cold.

Here you go, a bullish dashboard. Renewables are off everywhere. Off in the ISO because it rained buckets and solar doesn’t do well when the air is saturated with water; the MidC’s wind production tanked over the last 12 hours.

Yesterday was the first Flood Control release of the year. The Corps used a 95% of normal and had the following target elevations, by the end of April:

A Coulee draft to 1249.9 suggests that drum gate work is viable, should the Corps elect to do so. If they did, the reservoir would need to be pulled to 1255′ by March 15; it is at 1278′ today meaning 80% of the draft would take place between now and March 15 and only 5′ from March 16 to April 30.  I’d suggest that it is bullish for April.

The 95% of normal strikes me as odd given where the NWRFC is forecasting its STP:

You would think we were in a 70% water year, not 95%, after looking at those plots, especially Feb and March.  We believe each is about two gigs light.

What a difference a storm or two can make; check out the moves at SP and NP  in snow anomalies; last week they were in the low 80s/high 70s now each has a 90 handle.

Big rain means big flows;  Shasta discharge is over 40,000 cfs!

So the NWRFC has a very tight 120 day, but their 10-day is radically more bearish than Monday’s STP. With the storms shifted north, don’t be too surprised to see these numbers revised further upward. So much of the Northwest’s precipitation is coming down as rain this year; how much snow will be there to melt in June?

Conclusions

Was a bear, been a bear, still a bear. But bearish is relative to price, so let’s take a look at the market and see if we are so bearish we’d keep on those shorts.

Good Morning,

My takeaway from the fundy crawl was bearish. Bearish off of weather, both warm and wet, plus the TTC cut on the AC won’t help the MidC, though might firm up the ISO. Let’s see if the market is cheap enough to warrant some buys. Today we’ll examine the MidC curve, starting with BOM and include the rolls.

I’ll comment in the above APT order.

These are cheap prices, both Power Price (PP) and Heat Rate (HR). Are they cheap enough, though? I don’t think so, though the heat rate is well below the one year average. I’m concerned about:

• Sumas still has another $1.00 to give back
• Loads will drop this week
• The MidC isn’t dry, just not above normal
• California will be pounded with rain, maybe adding another 1000 MWs of hydro energy

Sorry, I’d Sell BOM before buying.

Feb is in a death spiral, too, but don’t think that bear trend is over. For the same reasons we’d sell BOM, we’d also short Prompt, and Feb also will see flood control induced flows. SHORT

Two schools of thought on the Prompt|BOM roll. One says Feb will see higher flows than Jan and you should sell the roll; plus it hasn’t gotten a bit pricey after trading negative thirty! The other school says buy this because Jan owns a 14-day warm anomaly whereas Feb still has a chance for a real cold event.  I’d lean towards School One as a bird in the hand is worth two in the bush. That said, I’d short both of them.

March is cheaper, not cheap. If there is drum gate work this year, the draft will come early, most of it in those first two weeks of March. SELL.

The roll isn’t cheap anymore, it is reasonably priced. Odds of cold are greater in Feb, and if did anything, I’d sell the roll (buy Feb, sell March), but I’m short it all, so PASS

April took a tumble, like the other bullets, but is still more on the rich side than not. This is a dry water year, and we may see minimal draft-induced April flows. That said, we are bears in the front, in cash, so why would we buy anything? PASS

The Widow-maker, April-March, and it is priced within the one year average. There won’t be a lot of regulated water assuming a 1248′ draft and there are several instances where April cleared over March (2017!). no reason to clutter up the book with a marginally interesting position – PASS.

Like all things MidC, the May has sold off. But this is a dry water year, 91% as of Friday, so shouldn’t it rally? You can’t blame this selloff on the restoration of Westcoast pipe’s capacity, no, one ever expected the outage to extend into May. Perhaps not, but rally May did off that explosion, look at the move around Oct 15. That was the trade, shorting May off a Sumas rally.  I would be tempted to start buying this but will hold off and focus on the front. Let’s see what June and July have done.

The problem with a small draft is a small refill in May and June. If anything, I’d sell this roll today, but won’t; prefer a directionally short position in the front.

June stumbled Friday, but not by much. We like owning early summer at MidC, but not today. PASS

This isn’t cheap, the June|May roll, but it is a nice position to own if Socal doesn’t restore its import capacity. If Socal does recover that 1 BCF, then all summer bets are off. Still, the roll is a timing play – when does the snow melt? No one knows today so we’d be more inclined to fade anomalies. SELL

So much of this premium is driven by Socal Citygate. Traders hope and expect more $30 gas prices next summer, that is why July is clearing north of a 20k heat rate. I’d be nervous about taking too long of a SP summer position, and through buying July MidC at today’s prices, that is exactly what you would be doing.

I’d suggest you have better odds of high Citygate prices in June than July given the current construction schedules. This roll is quite pricey – SELL

August didn’t budge while the rest of the curve was smoked; but take a look at that heat rate rally last last week. This suggests August is probably $5.00 too high and will be sold down this week.

Good Morning,

I suspect everyone is at work today after the long holidays; probably easy to miss last week given it was a short week, plus there were no exciting fundies in play to pull you from home. We scoured Ansergy’s plethora of reports and found a few nuggets to share, but sorry to say none of these have us too excited about long or short, but more on that in Part Two to follow.

Let’s start with the weather outlooks:

What else is there to say? This is a moderate and mild forecast for WECC and warm for the USA (watch out, Nymex). How about Precip?

Kalistan is at ground zero of a major storm system, one that may pull the state back to normal. Some of the system spills into the Northwest, but mainly the Snake, so MidC’s water outlook will be about the same as it is today – low 90s. This forecast takes us out to Jan 21, here is where that puts the water year, on average:

About 38% of the year will be realized by Jan 21, on average. As you can see, in just another two weeks more than 50% of the water year has been realized. In other words, it’s getting close to “now or never” though after 25 years in this business the word “never” is one you’d be wise never to use.

There is a telling chart. Sumas is now trading, in the spot, beneath Stanfield. The Westcoast Pipeline explosion, maybe the greatest potential threat to energy supplies the Northwest has seen since 2001, is over. We’re now back to cheap Sumas gas, and we’d guess the slide continues given a robust and full Jackson Prairie and very weak demand.

I love anomalies, that is what I look for when I run all of these reports. The above has an interesting one; NP cleared over SP on a few peak hours in the Day-Ahead LMP market. That hasn’t happened for a while, plus we saw some COB congestion. Given strong exports to the ISO and a weakening Sumas market,  we’d expect more congestion in the coming weeks.

The AC line continuously hit TTC over the last few days and more telling, even the weakest hours were exporting over 2000 MWs. Same story on the DC, all of which speaks to the underlying weakness at MidC. Those exports don’t suggest the ISO is strong, just a long supply balance in the Northwest, and it is growing longer.

TTC on the Malin500 line (AC) is scheduled to drop to 3100 MWs and stay there for over a month. In other words, the Northwest just found itself 1500 MWs longer on most hours. Go back to the transmission flows dashboard, you’ll see that BC has become a significant importer again. Without that swing demand,  MidC would struggle to keep all of its 7k heat rate units running.

Surprisingly, gas demand in Socal is quite robust. Check out those storage draws over the last week – 4 BCF. Now, total storage in Socal is below last year’s low levels. Supposedly, the LDC will complete its repair of the Transwestern Topock line by mid-April which will restore another 500 MMCF. I’ll believe that when I see it, but this is important because once that fix is in place, the utility will commence repairing on a parallel line. All of which suggests that by summer there may be another 1 BCF of import capacity. Stay tuned.

Loads are mostly sideways, except at NP which saw a slight uptick.

We already talked about NOAA’s 6-14 day; these are the hourly temperature forecasts. Burbank is about as close to average as you can get while San Jose is forecasted to see more hours warmer than normal. But the one that jumped out was Portland – nearly every hour is above average.

SP saw a few big gas units come offline over the weekend, NP just one. Who cares, they don’t have the demand to run all of them anyways.

Solar took a massive hit on Saturday – rain! Total renewables on that day were near a season-low.

Meanwhile, the snow anomalies across the WECC have dropped over the last week. The MidC is now at 86%, falling from a water year high of 93%. California is in the high 70s to low 80s, but we’d expect the state to push closer to normal after these storms land.

This is the week of the first Flood Control guidance released by the Corps of Engineers. Here’s ‘our take:

Forecasts for the April-August at The Dalles are 91% of normal – that’s the period used by the USACE. Dropping the 91s into our historical tool suggests a Coulee draft to 1248′ and Libby to 2420′. You can get the rest of the projections from the report.

Coulee’s already drafted down to 1278, meaning that BPA only must pull another thirty feet in ninety days, not too much. This level of water supply also says there might be drum gate work if needed. Should they elect to work on those, they’ll pull Coulee to 1255′ by March 15. That would be bearish for Feb and March, given that 70% of the draft would take place in those two months. On top of that, most of the BC draft takes place in Feb and March.  Hhhhmmmmm.

Flows out of Coulee are up, week-on-week.

Because inflows are up and the reservoir isn’t being filled.

Folsom discharge soared over the weekend in anticipation of that massive storm. No one wants to see another spillgate disaster, right?

Total hydro energy production in the ISO is down over the last week, though we have to believe that trend will reverse itself once these storms make landfall.

Today is STP, and if the NWRFC’s 10-Day is a tell, it is telling us mixed signals. The feds posted a big rally for this week (more MidC weakness) but are cutting energy next week. We still think their STP forecasts are overall, too low.

Just from a regulated water perspective, these levels seem too low. There will be a draft, that is a given with a 91% water supply forecast, though these summaries don’t suggest that. Maybe April is right after the 1500 MW bump last week, but we think the Feb-March remains light.

Conclusions

Weather doesn’t bring us to a bullish sentiment. Socal Gas’s diminishing storage kind of gets us excited but that’s weakened by above normal weather. Further curbing our enthusiasm are these massive storms set to slam the WECC. Watching Sumas slide below Stanfield pours more rain on the flickering bullish embers. The only thing left to make us want to buy are cheap prices, and we’ll get to those in the next post.