Good Morning,

It feels like the markets could turn if only they’d get some help from Mother Nature. Where we were all raging bulls with visions of blackouts blanketing the Northwest and LA, now no one owns anything, and the markets keep sliding.

BOM Power is a freefall, a death spiral to zero, or is it? If gas firmed up, the pain would dissipate. Will it? Has it?

Socal Citygate looks more tippy-toppy than it did last Monday; back then, the hub looked nearly invincible, now all the prompt bullets pulled back last week. How about Sumas, trainwreck that she is…

The Market hates Sumas, the bleeding hasn’t ended, or at least as of the close on Friday, it wasn’t over. What would turn around the Sumas would be some new bullish news on Westcoast’s pipe – like another cataclysmic explosion of about sixty miles of pipe that would take a California-like three years to repair. Let’s see if that happened over the weekend:

Oh my, just the opposite. Those pesky Canadians fixed the dang pipe; now it is flowing just below last year’s winter levels. No respite here, but maybe our initial savior, Mother Nature, will step up to the plate and lob us a watermelon.

Well, Sunday’s forecast has hints of bullishness; recall last Friday, there was but a tiny circle, a total of about 2.1 square miles, of normal temps somewhere between Utah and Idaho. Now, the entire WECC hinterland is either below average or normal – that is a confirmed bullish change. But the load-center coastal strips  – from SD to SEA – are above normal. Still, the trend is cooler, perhaps that extends and turns these maps dark blue!

Cash is up a bit but more interesting is the flatness of the curve across all LMP nodes – there is like zero congestion anywhere. Free transmission, pay nothing for losses.

The Northwest was cold, so was California, and we bet that cold made a big dent in Jackson Prarie’s storage – right?

Wrong, storage at JP is above last year’s, same day, levels. How’s that happen when Sumas has been a half a BCF a day lower than last year? Call it the resiliency of BPA and its wards; they quit burning gas at the I-5 turbines, and it wasn’t that cold, loads were never that high, and whatever rally occurred was quashed by a slight ramp-up in hydro.

We love this dashboard, and so should you, as it summarizes everything you need to know about the MidC. The top group is a weekly week-on-week; the bottom is a year-on-year comparison; and the right side is the same for LL. Here’s the same for the ISO:

The ISO’s dashboard is slightly different since it deploys its own data sources. But at a glance, you can see what you need to know.

One fundy you already know – MidC Loads cratered, week-on-week, while SP’s are sideways and NP’s are off. Here’s the gas side:

PG&E demand has tanked while Socal’s is sideways; but while PG&E load is off, so are its imports.

Yet it’s getting colder, right? Not in LA, that land of plenty may hit the 80s this week!. Dust off those AC units and pool-chillers my friends, it’s getting toasty. While LA roasts, check out the changes in temps at Portland, not only are they falling, they are getting colder than three days ago. The trend is the friend and Northwest loads are going to soar by week’s end.

Kally was wet over the weekend, check out those solar haircuts; the Northwest was blustery, Seattle had gusts in the 60s, and BPA was awash in wind energy.

Our water supply forecasts for Cal are mostly just normal to slightly above while the PNW is below average, but not by much.

The precip outlook is above normal across the WECC:

Which should push the NWRFC’s forecasts up, perhaps converging back to Ansergy’s numbers?

Speaking of the RFC, those folks must have gotten back-door long as they just shaved about a gig off of their 10-day. I’d guess this is more a reflection of how warm it is which drives BPA to cut discharge and conserve scarce water molecules. Either that, or it is just random noise? Given that today is STP Monday, you might brace yourself for a BOM haircut.

We see flows out of Coulee dropping following the warm-up; inflows are not rallying fast enough to force more water through the turbines. Instead, water is staying in the reservoir:

Don’t be confused by the “MIN”; the current values are the MIN, and you can see that over the last few days BPA has filled a foot or so.

Flows in BC are mostly up on substantial rain and snow.

The US flows above Coulee are also mostly up, though we see some substantial regulation changes taking place at Libby, Horse, and Lake Pend Oreille. Check out the flows on the Spokane, those just gapped up to nearly 7kcfs, which is approaching hydraulic capacity for most of Avista’s projects.

Some modest changes in BPA’s TTC: the derate at the end of the month is off; now the AC is back to full capacity.

Energy is flowing into Canada from the MidC; that is a gig swing in net energy at MidC; the DC went to zero for a few hours yesterday; flows into the ISO are off at both Palo and Mead.

Conclusions

It’s not easy to call bottoms or tops, but this recent sell-off is feeling tired, to me. The weather is trending colder and prices are cheap, both relative to where they’ve been and just cheap fundamentally – as long as gas quits puking. More on that in the next post.

 

 

 

Good Morning,

I believe the fundy takeaway was bearish caveated by “it’s all relative to price.” Today’s APT review is a bit different, we added SP and MidC and included outrights, spreads, and rolls.

We then sorted on WoW (Week on Week change in Rank) to render the above table. The trades we’re looking at today are the biggest WOWs (absolute value-wise). Those highlighted will be discussed below, in the above order.

The BOM has Bombed; SP has tanked, and I’d suggest it is cheap both Heat Rate (HR) and Power Price (PP). Yet, weather is bearish and it’s “catch a falling knife.” Perhaps wait until weather changes, or maybe not. BUY.

This charts the Mar-Feb MidC roll and, not surprisingly, the trade has returned about half the WEI premium. Just half, there is more to be paid. One additional factor to consider when comparing March to February – that is flood control drafts. The MidC is in a tight water year, so far, which means low drafts and may mean little regulated March water. It also says we probably won’t see drum gate work on Coulee this year, so no accelerated draft to 1255′ by March 15. Just food for thought, we chewed and are …. LONG

Prompt vs. BOM at SP; where this crack-pipe roll got as cheap as $-17, now it’s $+4.00 – a $21 swing. Granted, the Dec temperature forecasts are bearish, but what’s to say that Jan will be bullish? If anything, buying this is like owning a free call option on a cold event, or another problem with gas infrastructure. Because it is relatively rich, historically, we are …………… SELLING.

Feb to Jan, MidC; was cheap, now it is, at best, reasonably priced. PASS or liquidate your long position.

This heat rate, Jan SP, is at a contract low on declining gas prices; typically, heat rates and gas prices are inversely correlated. While gas is screaming up, the heat rate is tanking, but not in the Jan. The Jan gas is drifting down while the power price is tanking. This suggests that Jan SP is cheap and we are …………….. BUYING

March SP isn’t that cheap; the heat rate is at a contract low, but the price is just below the contract high. Since we just got long the Prompt, why double down. PASS

SP’s March-Feb roll has just returned to Reality; it was unrealistically priced for nearly a month, and anyone who owned the roll has seen their MTM scream; now it is time to turn MTM to Cash… SELL.

Not loving on the forecast in this one, but ignore that and you’re left with a spread that is getting cheap on HR and a bit more rich on PP; that said, we’d still own the spread off of all that rain working its way through MidC’s turbines and the looming return of WEI to full capacity. Where does MidC trade when Sumas is back to its usual $2.00 handle? LONG

Same sentiment …………. LONG

A bit deeper in the curve, now we’re looking at the April – March at SP, and it is cheap price and fair HR. Do what you like, flip a coin, rock scissor paper it; we’re PASSING.

 

Good Morning,

Another changing of the guard; now we’re seeing drier conditions in both California and the Northwest, though the warm remains in the 6-10 and dissipates (in the NW) in the 8-14 day; though CA stays warm primarily through Christmas.

Where yesterday the NW was blanketed by dark green, today it is barely “mint green” in the 6-10 day and just one of those 50 shades of gray in the 8-14. Interesting, the forecast is growing colder – could that trend extend through the weekend and we get another dark blue blob by Monday?

Kalistan, where our friends desperately need water, is a muddy brown, which is appropriate, given that the state’s slogan is “Brown is down, Yellow is mellow”; which refers to how they dispatch their toilettes during these dry times.

Meanwhile, the BOM has been battered:

Every traded hub is down from the peaks with no end in sight. Don’t expect that to change as long as that 6-14 day outlook remains warm. Gas is trading in sympathy to power, or is it the other way around?

Sumas desperately clings to a positive basis to Henry in Jan and Feb; we doubt that holds by post-holiday.

Socal Citygate is more resilient, that hub’s infrastructure problems are more widespread and its ability to resolve those problems more problematic, all of which suggests long spreads is/was money.

Both Citygate and Sumas tanked, week on week; the latter has two bearish factors currently in play. Weather, we already discussed, and a restoration of full capacity on WEI, which we’ll address in the following package of plots:

Forget these day to day oscillations, look at the trend post-Oct 10 (day of explosion); nothing but up. Now, on the Canadian side, flows are back to pre-explosion levels. How long until some of that new-found gas seeps across the border? We’d suggest almost immediately. The fact WEI restored cold-snap levels during a warm event suggests they are itching to get flows back to 100% of capacity and why wouldn’t they? As a shipper, they only get paid for moving MCF; plus their customers are screaming to get their capacity back.

Think about what that means. If Sumas is back to normal, all that remains which can be construed bullish is snowpack, and this latest storm system helped move the needle closer to normal. No wonder the forward curves (gas and power) are tanking.

We mentioned that the situation in Cally is a bit different; there the storage system is probably permanently broken, and full import capacity at Socal shows no sign of returning. Though it warmed, PG&E demand has barely come off, its electric demand is up. Socal’s demand fell harder, off 400 MMCF, and now its back to injecting gas, something we’d expect to continue for the next few weeks given the extended warm weather. At some point, even Socal Citygate will come under attack, but not in Dec; we doubt – hang on to those long spreads.

I think we predicted the week-on-week power demand anomalies would get ugly; all hubs are down, but the MidC has the sharpest decay.

And if anything, that decay will continue well into next week as every hub will approach record warm (ten-year records) by the middle of next week.

CGS is sputtering, now BPA doesn’t even care. All the other nukes are back to full capacity, just when they’re not needed.

SP has seen a spike in wind outages, probably just random.

With Sumas flows increasing, now the I-5 gas turbines are returning, adding more misery to the MidC longs. All they can cling to now is a dry year but won’t get paid for that until we get a bit deeper into the water year. More on that in post #2.

Did we say the misery index was rallying? Oh yes, and check out that MidC wind – like nearly 100% of BPA’s capacity for a few hours. On top of that, all three ISO hubs have seen their solar approach full capacity, too.

Water supply (NRWFC’s version) rallied with these storms, but now its pulled back slightly at TDA and GCL, but check out that whipsaw at Ice Harbor (Snake). An upswing of 11% (for a day), then a plunge downward of 7% a few days later; for our model to do that we’d need about 20″ of SWE, then 90 degrees to melt it.

This a new dashboard, one which summarizes the Precip and Snow at a hub-level. The Northwest rallied but remains well behind a typical year while Calif. tanked but is clinging to above average. El what?

Coulee discharge is off because loads are down; BPA doesn’t need the energy, especially with the return of its gas generation (Sumas).

This is just the start; we see another 2000 MWs of peak thermal coming back online soon:

Soon as in by year’s end, most likely.

As discharge drops at Coulee, its inflows are picking up; check out that spike to 6k on the Spokane; rallies at Clark Fork and Pend Oreille too. Regulated discharge at Libby is up to 22k. We don’t expect increases in inflows to result in energy rallies; instead,  BPA will refill its reservoirs.

Coulee is a full MAF (14%) lower than the average of the last four years. No, these new inflows will be left in Lake Roosevelt and used for the next cold snap.

More evidence of a big storm; flows on the Snake River side flows rallied hard, and most of that water will flow through all the Lower Columbia projects. Hells Canyon can catch the Upper Snake but not the Clearwater or Salmon.

As loads fall and the state dries out (again), the total ISO energy is fast declining adding an, albeit, modest bullish factor to the mix.

All ten days in the NWRFC’s 10-day are showing increases in energy versus Monday’s STP, but these are small and speak to the relative stability of Northwest hydro.

No material changes to BPA’s TTC; the AC is derated from a week ago’s forecast; the DC is unchanged.

Check out northbound flows on the Northern Intertie (to BC); another strong bearish indicator. Same with southbound flows on Cob and Nob, each approaching TTC. Just the opposite in the southern interties, most are at flowing at two-week lows.

Conclusions

Bearish, but that sentiment is relative to price. Has price dropped enough to warrant buying something or unwinding those long rolls and spreads? More on that in the next post.

 

Good Morning,

Today, I’ll walk through some Qs; not for any valid reason, just because we haven’t recently looked at the Qs. Given all of the recent front-end volatility, perhaps the back-end contains some nuggets to be mined by the diligent prospector.

APT Filter for Qs

These are reported per the above order, sorted on Rank.

The forecast model has been very bearish on Palo of late, that’s reflected in the above Q3 spread. The market heat rate has collapsed, mostly off the MidC incorrectly rallying off a Sumas issue that will have long since been fixed by Q3. Fundamentally, MidC is technically bullish Q3 given the dry conditions, but the weather crystal ball suggests that is changing. With the nukes returning, the WECC growing weaker over the next few weeks, we’d be reluctant to get long rich spreads; if anything, we’d probably sell this, but there are better trades to follow, so we are PASSING.

Alright, this is the spread between SP and MidC for Q2 and it’s really not priced that rich, we’d be buyers off of:

• Resolved Sumas Issues (more or less, but confident by Q2)
• Unresolved Socal Issues
• Northwest water year that looks to rally hard over the next few weeks (is this a longer-term pattern?)
• Possibly very weak MidC cash and just typical SP cash

BUY

This is the roll at NP for Q1 vs Q4 and it’s cheap heat rate and price. Much of the cheapness was off of very high Q4 cash in 2018 and we haven’t seen anything of Q1 yet. Since this is a year out we’d be more inclined to fade extremes; cheap is the extreme as of today, therefore we are …. .BUYERS.

This is the prompt Q spread for SP-MC and it too is cheap for both HR and PP; the forecast looks stupid, but the model is what it is and we don’t disagree; this looks cheap and we are …. BUYERS

Oooh, summer NP. Nothing cheap here, priced high for both HR and PP, but HR came off a touch. Still, this is rich and there is plenty of time to get long the Q3; why not find a time when the ISO starts posting some negative hourlies? That said, we aren’t selling Q3 as we’d like to keep our Virtual Trader job (and keep you as a client).   PASS

I like selling this because I don’t really like MidC. I live here, should like it, but don’t like owning record highs, not in the face of big wet and a soon to be resolved Sumas problem. SHORT

The summer spread between the two ISO hubs; on a heat rate basis it is pricey. Only because the market correctly assumes Citygate is a trainwreck again and steals all of ZPs gas gen leaving NP scrambling to serve its own loads. If this is priced off of last year it may be cheap; recall that NoCal was not hot last summer, SoCal was. If NoCal hot and SP is in its import mode, NP could be the sleeper Q3 hub. LONG

Prompt Q for NP and it’s rich PP and cheap HR. The trend is down, PP-wise, and we’d chase it down some more given the overall weak WECC outlook.  Modestly Bearish.

Get creative, try an On|Off. This one is Prompt Q at MidC and, though the market has tanked, we see more room to tumble given that it is winter. After all, evening loads are more stable than day time and BPA is going to store as much of this new-found water as it can. Take away that Sumas premium and this falls back to the 5-7 range rendering the lucky short a $5 win. Sell.

Out there a ways in the curve, the Q4 SP, and this is sky-high price-wise and fairly priced on the heat rate. If I sold anything naked short it would be the Q4, but not sure you need to short SP if you are selling MidC. PASS

This is the Prompt Q Roll at SP and it is cheap PP and rich HR, but PP is rallying and if there is another cold day in LA the roll has another $10 to move up. Plus, you get a summer month in Q2 (June). BUY

On|Off fodder, here at SP; the train left the station last week, your short opp is gone; we’d be more inclined to buy this as hedge against cold. LONG

Prompt Q outright at MidC and the market is correcting, but it isn’t done. SHORT

Good Morning,

Like the CIA and another Banana Republic, the WECC weather gods have decided its time for something new, a regime change. Where we stared at Cold and Dry, now we are thunderstruck by warm and wet. That would be great if we were watching porn, but we’re not, it’s a mockumentary called “The WECC”, my friends.

Hah! Not just the west is warm; the entire frigging country is blanketed in above average temperatures; all except for that den of LDS iniquity – Elko Nevada. Not only will WECC loads plummet, now the Nymex is going to collapse and give back that buck it so proudly added to its curve.

We did say warm and wet, right?

OMG, and look who’s wearing the bullseye – the MidC and it isn’t just the westside; the production basins are all at ground zero. NCEP shows it better, in my opinion.

If you extrapolate cumulative inches from the map, you get a range of 3 to 8 inches which equates to a season of snowpack, or at least a good start to a season. Of course, with warm weather, we’ll be looking at 5k freezing levels all of which means low-level flooding, rivers to record levels (for Dec) and energy production soaring all the while demand is tanking – maybe we are watching porno — if we’re short.

One solid bullish bullet, cuts at Hungtingdon on Westcoast:

OK, but we’re a glass-half-empty shop, and we’ll turn even that bullish nugget to a bear indicator. Think, why are these cuts showing up now? Easy, the rallies were in response to demand, to that moderately cold weather last week; that has passed and Westcoast is backing down its pressures (flows) to a “safer” range. Hah, they already proved the flows were quite safe at nearly fully pressurized, just how long do you think they’ll pass on those lost profits? Even if they idle at these levels, we now know that the next cold snap will see an additional 500 MMCF flowing into Vancouver and 250 MMCF into Seattle. The “Fear Premium” has just taken a haircut; not even sure Sumas deserves any fear premium any longer.

LMPs have stumbled, all points are about half of what they were a week earlier. To emphasize that point, NP cleared over SP yesterday for today in both on and off-peak.

These spot charts are rendered less useful due to those spikes, let’s zoom in on the table.

Sumas is now $3.00 under Socal Citygate, but still over PG&E, and off by$4.00 from last week’s levels. All MidC gas hubs are still carrying premiums; interesting how supply issues at Sumas have seeped into GTNW’s hubs. Both pipe’s premiums are at risk; all depends on when Westcoast is given the regulatory nod to take the pipe to 100%. We now know they can safely do that, this was proven last week. One must conclude the argument to be made to the regulators will be that much easier now.

All winter Sumas strips have tanked; they ran up in sympathy with that “Siberian Express” which turned out to be more Saharan than Siberian.

Citygate pulled back some, too, but not near as much as Sumas. You see, the Canadians actually fix their broken pipes, the Californians yawn, talk, and fiddle away years on theirs without actually accomplishing anything. So Citygate is still the long’s wet dream come true and doubt that changes through summer 2019.

California demand is off about a half a BCF from last week. Storage is off nearly 3 BCF and where Socal carried a significant premium (15 BCF) over last year, now that buffer is just 5 BCF while PG&E storage lags 2018 by 27 BCF. This would be a more significant concern if it were cold, it’s not. Still, winter is early; it’s not even officially winter yet.

Mostly, temperatures are at or above average, though in the 7-10 day there are hints of record warm weather; Burbank actually might realize some AC load during that period. The Bay Area will bask in the low 70s, in Dec!. Where’re The Donald’s tweets mocking global warming now?

Mostly Sunday’s loads were higher than last week; we expect these demand plots to show a massive week on week decay by week’s end.

CGS stumbled, posting a 66% on Friday. Both DC units are back to 100% and PV2 spiked to 66% and should be at 100% today.

The WECC is becalmed, wind gen tanked, though solar rallied, yet total renewables are off.

Loads weren’t that high last week, and it wasn’t that cold; there were two years colder (2013 and 2009).  Though BPA ramped up its hydro production, those higher levels weren’t even close to what has been generated in past years. The most telling stats are the thermal and wind, both record lows. The former is Sumas related; the latter is random. One other great equalizer of last week was the Northern Intertie imports; BC saved the day. Not only are the Canadians taking all of our China heat by arresting our enemies, but they are also keeping our lights on.

Wind didn’t help Kally balance last week, but imports from NV and AZ did. Hydro is off from the last two years, though these storms might jump start winter production next week.

Hey, it’s time to play “Flood Control.” How deep will the Jan targeted draft be? The correct way to phrase that question when the water supply forecast is 88% is “How Low will it be?” Using our handy Flood Control tool, we can make an educated guess.

The Corps will use the April-August value as of around Jan 5th; if we use today’s (88%) we can predict the draft at all the projects. In the tables above, I’ve included the last twenty years draft requirements by the end of April as of the January release. The ranges are broad, the January number is less meaningful than the Feb and March, but it makes great blog fodder. The numbers: GCL to 1259; Arrow to 1414; and Libby to 2440.  Click here to see all reservoirs.

This report is fun; we’ve created hub-level precip and SWE anomalies for the WECC. Just how dry is the MidC? Well, the answer is

• Snow = 55%
• Precip = 78%

Ouch, you say; yawn we do. It is early in the water year; these anomalies don’t mean a lot. Here is our Day of Water Year weightings:

These are based upon the last thirty years daily accumulations of SWE; as you can easily see, the next 60 days make or break the water year. It looks like they’ll start with a bang.

Coulee discharge is up week on week, but we suggest you focus on the levels from last week. Those were higher (daily averages), and that water is still working its way through the system:

Check out the lag at BON; yesterday was its peak while GCL’s peaked on Thursday. All of the gauges above Coulee are on the upswing:

Most of those new flows are from regulation – aka draft. But, if the Clark Fork basin bags eight inches over the next two weeks, you should expect flows around the mid 20 kcfs, and more on the Pend Oreille. Easily, we could see the MidC add another 3000 aMW of natural river flow energy under the worst-case scenario.

Offsetting those new flows will be a dire need for BPA to recharge the reservoirs. In a month, BC and BPA have pulled 3 MAF to serve load and are a collective 3.3 behind last year’s levels. Much of this new water will end up in the reservoirs, but not all.

This is an astounding plot, but we’d suggest most of those bumps are the effect of drafting to serve last week’s loads; now everyone got long and this is just a visualization of the water making its way to the Pacific Ocean.

Some new cuts to south-bound transmission; we’d have suggested these were moot last week, but given falling loads and rallying water they only make the MidC ever more bearish.

BC is back to its buying ways, expect more of that. Palo blew past its TTC in haste to chase ISO prices; the hub is long and getting longer.

Conclusions

Bearish!

Greetings,

Ansergy will commence a weekly Water Supply Briefing via the ENElyst chat platform this coming Tuesday. We encourage all our clients to log in and check out not only the Ansergy update but the many other timely discussions ranging from Natural Gas, Crude Oil, weather, and other mission-critical energy topics.

You will need to register, click here to get free access to the site, compliments of Ansergy and the Enelyst Team.

Our presentation will cover all things hydro starting with the latest weather forecasts and finishing with some thoughts on the markets.

Slide 1 – NOAA Precipitation Outlook

Slide 2 – NCEP Precipitation Outlook

Wet, wow!

Slide 3 – Week on Week Snow Anomalies (NRCS)

Got dryer

Slide 4 – Week on Week Snow Cover

hardly noticeable changes.

Slide 5 – Water Supply – California

Ansergy’s internal water supply forecasts made for all of the WECC rivers.

Slide 6 – Water Supply – Northwest

Includes the NWRFC’s numbers.

Slide 7 – NWRFC Apr-August Forecast (used for Flood Control)

Slide 8 – Ansergy’s forecasted Flood Drafts

Forecasted drafts at Coulee, Libby, and Arrow

Slide 9 – YTD Precip and SWE Hub-level anomalies

Slide 10 – Latest Monthly STP Energy values

Slide 11- Latest Daily STP Energy values

Slide 12- Year on Year STP Values

Slide 13- Trading Opportunities

 

Each week Ansergy will make its presentation on the ENElyst platform, and we encourage everyone to log in for all the shows.

• Team Ansergy
• [email protected]
• 206-877-0991

Good Morning,

Let’s examine the MidC today since the hub’s term has been the WECC’s most volatile over the past few weeks.

These are the strips we’ll examine, in period order.

BOM collapsed but only because Sumas crashed, note the heat rate is still below the one year average. Again, we see more downside than up given warming weather and increasing WEI pressure. A full return of Sumas inflows would put the BOM price in the 30-40s and the heat rate back to 10-12; not there yet, though much closer. Sell.

Prompt (Jan) is in a parallel downward trajectory yet, like BOM, retains Sumas premiums. The bet here is the pipe is restored or, equally relevant, WEI will jack flows whenever it is cold. Either way, Sumas should not command much of a premium. Sell.

Rolls, these seem as volatile as the underlying and an even safer way to trade. This roll, the Jan to Dec, is now approaching its one year average and nearly all of the Sumas fear premium has been extracted from the price. We were buyers of all these rolls off of returning WEI flows and diminishing (and short-lived) cold weather fears. Now the market is factoring in a much lower probability of another Dec cold snap (probably an incorrect assumption), and the roll is reasonably priced. If you got long this, I’d cover it and go flat. Since we’re still short both BOM and Prompt, we’d just liquidate that long roll position

Feb tanked, but not as much as Dec or Jan. I think the risk of blackouts in Feb is lower today than it was two weeks ago and most of the Sumas premium should be toast. After all, WEI has proven two things:

1.  The pipeline can deliver more gas – safely
2. The regulators will let WEI push more gas if it’s cold

So what are the odds of a cold event hitting the Northwest and WEI not increasing flows? I’d say about zero unless the pipe blows up again. Sell.

This roll screamed up about $15.00 — on a roll — yet we’d suggest it is still cheap and would buy more of it. Buy.

Same as the Feb, the market has come off, but there is more room to fall. Sell as long as the weather outlooks are warm and wet, or the price approaches the yearly averages.

Feb is still commanding a $6.00 “Sumas” premium, and the odds of any premium are lower today than the recent past. Buy.

April is relatively expensive, but that has more to do with dry conditions than gas prices. Big wet can wipe out those premiums reasonably quickly and the market tends to move in sympathy with cash; if cash is bearish so shall the forwards. That said, we already sold the front and are running out of VaR – pass.

This roll, the April to March, is now fairly priced and we’d approach it from a pure hydro play. Given that, and an uncertain hydro outlook, we’ll pass.

Q2 is expensive, but why wouldn’t it be given that the water supply forecasts now sport 80 handles, and it is only Dec 6. However, should one of these storms land that 80 handle will become a 90 handle; should a second system land we’ll be back to normal. If I were a long genco, I’d be tempted to sell though the heat rate is just reasonably priced. If the storms land or I become confident they will hit, I’d sell, for now, I’d just pass.

The Two to One rallied as the fear of gas blackouts diminished. The roll is still cheap and buying it would be our preference, but given our front end short bias we don’t need this baggage in the book – pass.

Like the Q2, the three is richly priced on both Price and Heat Rate. Rightfully so, we might add. For now, it’s a dry year, and Socal didn’t fix anything.

The 3s premium to the two has grown, it has been growing since June. This roll is a combo gas play (Citygate) and water year. Both are bullish and at a price, I’d sell the roll, but not today.

 

Good Morning,

Well, it seems most of the cold weather is over, at least forecast-wise, though today is technically the last day of the cold.

Most of the WECC reverts to normal, maybe slightly below, and then slides into a warming trend per NOAA, though Dark Sky teases of another cold wave hitting LA and the Bay Area in days 9-10. We wouldn’t bet on that; we’d bet on every city on the west coast growing ten degrees warmer by the weekend.

That’s what NOAA painted yesterday, who knows what she’ll post today; these 6-10/8-14s have been all over the weather map, kind of like Sumas Spot or those pesky winter MidC rolls??? While we’re on the weather wagon, here’s the precip outlook:

These precip forecasts are as volatile as the temps, though the trend this winter has been to tease of catastrophic wetness in the 8-15 which turns to draught in the 1-6. Would only take one to land to revert the Northwest close to normal; Kally’s already there.

Let’s talk about gas since that fundy remains the WECC’s primary driver.

Westcoast Pipeline has restored nearly all of its southbound capacity, at least for the short-term. One alert reader pointed out this was just to serve the incremental cold-driven demand and suggested the pipe backs down to a “safer” pressure level. Not so sure about that, didn’t WEI just prove the pipes are safe? If I was a betting man, and once was, I’d be leaning more towards WEI going to 100% sooner rather than later. If so, most, if not all, of MidC’s Sumas premiums disappear. We already see that take place, but more on that in the post to follow. Also, take note of the disconnect between changes at Huntingdon versus Sumas. In past times, the R Value between the two points was nearly 1.00; not so much of late.

Something else we saw was the return of gas-fired power in the I-5 corridor:

Chehalis, Freddy, and Goldendale all fired up which means so did River Road. Of course, this was to serve load, but somehow, somewhere, the operators found the gas. Some of that they pulled from JP:

A big phat 200 MMCF draw, but compare that draw to other big winter draws – not even close the 600 pulled a few times in past cold events. This is interesting since it bookends what happens during a constrained Sumas day while Seattle posts lows in the high 20s and confirms a fear/hope/expectation that all the dire predictions were driven by hype and not reality. The truth is the system is reliable, and utilities hate posting unserved load. Just how did they dodge the blackout bullet?

BPA’s peak loads were up 2000 MWs, nothing to sneer at, but Hydro rallied 1400 and exports dropped 300. All of BPA’s cold snap load is thus met. Coulee provided much of the incremental power:

Flows through the turbines were up 30,000 cfs from last week, some of this came from increased inflows, the rest from drafting Coulee’s reservoir:

Coulee’s reservoir is not even close to its ten year low for this day of the year, suggesting there are more bullets left, though the number is finite. But what with more warm weather and possibly big wet, it seems the Northwestern Americans dodged a disaster. Given the return of the I-5 turbines and increased flows into Huntingdon perhaps those increased flows into Sumas saved the day?

Note something odd? Check out the rally in the derived Vancouver area demand (Huntingdon minus Sumas) and the Puget Area Demand (Sumas minus Chehalis). Either there is a lag between NWP and WEI’s nom cycles or the Canadians are not sharing the love. What happens when they loosen the Sumas spigot? Well, we could expect to see at least an additional 200 MMCF south-bound and those I-5 turbines run through the balance of winter.

Let’s look at DA LMPs to get an idea of how bad it indeed was this week.

Oh, prices came off, they didn’t rally. From the ridiculous Sunday for Monday clears, the LMPs tanked $65/mwh. Also take note of the massive PV congestion, almost every hour traded at a discount, a big one at that. As goes power, so goes gas – or is it the other way around?

Sumas is now trading at a discount to Socal Citygate with its single digit handle ($7). Term gas, too, came off.

Yet a fat premium remains, one that must be highly at risk should Sumas get its fair share of the Huntingdon rally. Socal is tighter…

Jan pulled back a bit, but the other bullets either rallied or drifted sideways. Let’s look at supply and demand.

Loads rallied in California, but not anywhere near last winter’s peaks. Equally important and relevant, check out the rallies in supply at both SCG and PG&E all of which speaks to the resiliency of the system. When needed, extra gas is found.

The nukes are in flux; Diablo #2 is back to 100% but #1 remains at 52%, we still think its heading towards refuel next week. Meanwhile, PV#2 is ramping up and should be at 100% by Monday. Not that PV needs PV2, the hub is congesting heavily into SP. Diablo, should it be offline for all of December, is more problematic if another cold snap settles into the Bay Area.

Renewables didn’t help the cause; every reporting hub is off. California’s solar was rained out yesterday, and the Northwest is back to being becalmed.

Finally, let’s look at how much power demand was booked:

Clearly, very bullish in the Northwest and the other hubs also rallied. The fact the DA LMPs came off during the event speaks to the solid supply fundamentals.

Conclusions

A bullet dodged, a hype exposed, and massive term price volatility. With warmer weather, and possibly big rain on the horizon, one can’t help but feel bearish, but that sentiment is best measured relative to the market, so on to that next.

 

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.

 

Good Morning,

ADMIN NOTE – I’ll be traveling to AZ for the week to visit customers; will still be responding to emails and chats but no calls.

Lots of news leading to a volatile market growing even more volatile. The great Siberian Express that was poised to slam into the Northwest and drive rolling Black Outs and disruptions to gas service has died on the vine. The cold is gone, its a warm anomaly, and to add salt to an open wound, Enbridge is making noise about bringing Westcoast back to full capacity months ahead of their first doomsday forecast. Yep, so buckle in, the roller coaster is leaving the station.

Compare the “Puget Area Demand” to that at Vancouver; both of these are derived values, but clearly, there is a disconnect between new gas arriving at Huntingdon and then showing up at Sumas. Most likely, just a timing issue. Those values at Vancouver are nearly as high as any seen last winter, let alone this summer, before the explosion.

See what we mean about warm; no matter how you slice/dice/and stir fry this dish, it’s bearish.

Precip is bearish, too; all of the WECC production basins are above normal, but they need it given where NWRFC has put its water supply.

TDA is now at 87% of normal, a bold move when the year is so young; bolder still, IHR sits at 85%. That’s them, our internal forecast is more bearish, we have both stations just below normal. The difference between the two models is how you treat the Oct-Nov anomaly – Ansergy weights it quite small, like maybe 10% of the water year while the RFC  treats it as an equal to Dec-Mar.

Hard to write a post with the word “Bearish” included when DAs clear $180. In fact, SP had its highest winter clear in six years:

Impressive, right? Until you plot the heat rate …

Then you see the lowest winter clear in six years. It’s a roller coaster out there; up is down and in is out.

What’s in is Socal Citygate and what’s out is Sumas; those two flipped and we’d be inclined to suggest Sumas is soon to mean revert back to the 1s and 2s. Should that happen, you’ll see the entire winter curve get turned upside down. Again, buying all those cheap rolls seems a safe way to play this … (Jan-Dec, Feb-Jan, Mar-Feb, Apr-Mar) – each is worth $10-20. Money for nothing and ur chix for free.

Why’s Socal rocking and rolling? Demand is up a bit and year-on-year supply is down; while PG&E demand soared.

Socal’s demand rallied hard but still lags all of last year’s peak days; but PG&E’s demand just set a winter peak. Not because it was that cold, it wasn’t, but because ZP is serving SP’s power load which means NP must self-generate as it would typically draw 3 gigs from ZP. We could point that out to you in the tranny flows if the nazi ISO hadn’t taken away our Path 15/26 reports.

This chart takes a longer view of PG&E demand – today’s nominations were only exceeded twice in the last six years, and it isn’t even that cold.

It is “colder” than last week and colder than previous years, same day, but not cold. It is more warm than cold in the Northwest. How are power loads faring?

Bullish, every hub is up with NP and Palo rallying the hardest. But all that says is how bearish it was last week.

Diablo #1 dropped to 51% on Friday. An alert reader pointed out that this was due to “Storm Surge”. But wouldn’t #2 be impacted by those same waves? After all, #2 gets its cooling water from the same ocean. Watch #1, we think its due for a refuel, others say that won’t happen until Feb. If they do make it until then it would be the longest stretch between refuels in the last twenty years.

Check out those NP15 noms; almost as high as the peak summer levels and way beyond last winter. Why? SP can’t afford to burn $17 gas, so it leans on its friends to serve its load – check out the hub’s other friends.

Mead, Palo, and Utah are all sending more power to SP15; why wouldn’t they, $111 dailies and their gas is just $3-4. Even BC is jumping on, one hour they sold 2 gigs to MidC.

Timing was good – the ISO saw a near record total renewables over the weekend, during those extremely high prices. Sadly, BPA didn’t get much from its wind turbines.

The Northwest’s precip outlook in days 1-5 is next to nothing; two weeks ago this was like 2″. Just goes to show these winter storms are moving targets, just because they show up in the 8-14 means nothing.

Our Portland friends are piling on the bear wagon. They jacked their 10 day nearly 2 gigs. Recall, a week ago they backed off their ten day by the same amount. Up / down / merry go  around. If their sentiment holds, will be a bearish BOM STP today.

BPA bumped TTC on the AC and has a series of outages on the DC which takes the line to zero.

Conclusions

We’d sell the entire MidC curve out through March off the Westcoast news and possibly SP BOM off of a return to warm anomalies. Neither north or south have any hints of big HDD, spot gas is going to crash once this week’s “cold” is displaced by warm. More on that in the next post.