Market Commentary

Good Morning,

The forecasts have extended this mini-cold snap out a few more days …and enhanced it, especially at Portland:

24 degrees in Portland is cold plus the NWS extended the cold another 1-2 days.  This event will not  break the system but does act as a barometer for how well Mid-C will/would fare if the future brings an extended cold front.  The eastern components of the Mid-C  are “enjoying” the mid-teens; that enjoyment is especially felt in Avista’s service territory given that many of its customers remain power-less following a storm that struck the region …. two weeks ago.  Makes one wonder if all of their linemen were sent to that Aleutian island utility they purchased last year?

The northwest was fortunate the cold landed during a holiday but even so loads are up week on week:

This event is a pure north play, the south sees loads either unchanged or lower:

BPA owns plenty of hydro bullets and shot a few over the last few days as it tapped into its storage at Coulee, Libby, and Horse:

Outlfows, on the surface, don’t seem too interesting but remember that this last day was Thanksgiving and those flows were the same as Monday-Wednesday, on peak days.    More telling is what holding constant flows did to the reservoir … pulled two feet!   Imagine what a really cold event …that lasted for a week… would do to storage.  Call it bullish.

Call the NWRFC’s 10 day bullish, too:

And that plot can only render but one verdict on next week’s STP – bullish, especially given a relatively dry 10 day forecast for the WECC.  Dry, cold, calm also becalms the northwest’s renewables, or put another way, takes the wind out of its sails:

There was a burst of wind energy on the 24th but nada in the last couple days, probably nada in the next few.   Powerex has just been watching the events unfold, selling a bit, buying a bit, doing nothing a lot – probably because they have load issues of their own:

The AC has cut about a thousand MWs over the last few days, further testament to the cash bullishness in the northwest:

I remain bullish on Dec Mid-C (on or off) as does the forecast:

But the market hates that which I love:

leaving me to love it yet more.  I especially like the position of Dec in the stack:

So there you have it, “Mike’s Take”.  Enjoy the rest of your holiday.

Mike

Good Morning,

There are two types of children: one’s that can’t wait for dad to open their report card and those that hope dad forgets about that report card.  It’s time for Ansergy to hand dad (you, the customer) our report card but before we go there allow me to share a couple of observations on today’s fundamentals.  First, weather has turned just a touch colder in the front:

Portland is warmer today, though that has already traded, but cooler from the 26th-29th, while Boise is just cooler.   Also note the dry forecast has held for another day, a perhaps more material fundamental then extended chilly temperatures.  The RFC is picking up on that in the 10 day as they have shaved more energy out of the forecast :

Those are 1000-1500 MW cuts from its Monday STP forecast, a most material change in the near term outlook, especially in light of the cool weather.  Might make for an interesting Thanksgiving given that the A team will be home eating and drinking while the B or C team manages a perhaps short situation.

OK, back to that dreaded report card.  Let’s start with the current period, November, even though it is not officially in the books yet.

Mid-C November

The first plot is Off followed by On peak; both show the market and the forecast over the month-to-date liquidation values (black line).   Ansergy consistently out-predicted the market in the light load and the market beat Ansergy in the heavy.

SP15 November

Similar story though the on and off are reversed:  Ansergy beat the market up until the last week with its bearish on peak forecast while the market correctly called the bearishness in the off peak.  Interesting to note the convergence of the market to where the spot ultimately settles – that is one inherent advantage of a market over a forecast – it has the ability to correct itself by following spot markets.  We don’t have that luxury – that would be cheating.

Palo Verde November

Ansergy beats the market in the Palo off peak by calling the bearishness weeks ahead of the market selloff.  Then the market turns bear and oversells itself – whoops.  A similar story in the on peak however the market gets it right in the last week while Ansergy gets a bit too bearish.  NP15 has very similar results as Palo and I won’t bore you with those plots.

Mid-C October

Things look even rosier for Ansergy in October as it hit a home run in Oct off and laid down a sac fly in the on.

SP15 October

A bit different tale with the socal report card for both parties in the off peak as neither was even close to the final average settle.  The market called the on peak better than  the forecast over the last six weeks of trading, though the forecast was substantially better than the market during the first five weeks.

Palo Verde October

The Palo on peak is similar to SP15 – Ansergy did a good job predicting a lower value in the early stages then the market trounced the forecast.  The off peak shows neither the forecast nor the market got it right with the forecast under and the market over.

NP15 October

 

Ansergy nailed the on peak weeks ahead of the lagging market though that market did finally get it right, the last week before expiry.   Neither participant did too well in the off peak though Ansergy finished closer.

The point of this exercise is to answer the question “how good is the forecast at predicting settles?”  Good is a relative term and when it’s defined by comparing to the market the answer is clear – the forecast is more accurate  during the periods well in advance of delivery and the market slowly gets it right as delivery approaches.

Mike

Good Morning,

The cold snap snapped and now its not that cold, though loads are definitely up in the northwest:

Ansergy has added a couple more “actual” stations:  Pac East and Pac West – derived from the ISO’s Next Day Load Forecast and Nevada Power – this is system load pulled from their Oasis site.   Note the week on week changes: up 1000 MW from one week ago; up 2000 MW from two weeks ago.

That is the bulllish good news, but the weather has turned warmer:

and remains dry:

Even with a slight warming (2-4 degrees versus 3 days ago) the Mid-C will realize a bump in demand but will still be 1000-2000 MW lower than its typical winter peak:

The real news is the 10 days of no precip which is starting to drive some volatility in our Q2 and Q3 Mid-C forecasts:

Fast forward 10 days of no snow/rain and we should see another 1000 MW hydro haircut across most of the current water year.  Recent cuts have not done much to our May June forecasts due to those periods relative positions within their respective stacks:

That could, probably will, change given that June Mid-C is sitting on a bullish inflection point, one where a few thousand MWs less hydro will move the forecast up $5.00.  Dec Mid-C is at one of those points as well and should be a bullish beneficiary of this impending dry spell:

Clearly the market hates Dec Mid-C having sold off a few bucks in the last couple of days.  Fundamentally, however, it shouldn’t hate it so much given the dry trend.  At these levels (current market price) owning Dec is a much more prudent strategy than trying to squeeze out a few more drops of short blood.  Our inflection report supports this:

Perhaps this is over-stated, I have already pointed out one of the short-comings in this report – namely that Mid-C has 32,000 MW of hydro capacity to generate into rallies, something not reflected in the above plot.  That aside there is still more upside in being long than short since the reverse is less true … you won’t see the system back off as much as it will ramp into demand rallies.   Put me down as bullish on Dec Mid-C (on and off) given the recent selloff and dry forecasts.

For that matter I even like owning the Dec SP as it too has been beaten down like the proverbial red-headed step child:

Beaten down by the market but not so much by the forecast leaving the deltas at a contract low.  Would I trade the spread?  No, just be long both, but would be longer Mid-C than SP.    Another trade I’m starting to take a shining towards is the Dec SP on/off:

We haven’t seen the big rains hit the golden state but we will see the shortest day of the year in Dec which is bullish on peak (solar) and if we do get some big rains the run of river plants will be bearish off peak.  But it isn’t the fundamentals that draw me to this trade, it is the collapse of the market relative to the slight uptick in the forecast.

I’d also be inclined to go long the Dec SP-Palo:

It’s not worth a big position but is one of those products where the forecast and market are diverging and ultimately this is a bullish Mid-C play.  Speaking of bullish, check out today’s Fundamental Summary Report:

We are still working out a few kinks with this but its live on the site (not added to the menus, should be later today).   From the summary you can drill down to the groups to see what is driving this “model sentiment”:

This is a pure model-based sentiment calculation which is based upon each metric being either bullish, bearish, or neutral.  All metrics are then aggregated to determine the sentiment for that group or hub.  Mid-C has swung very bullish as 64 of the 66 metrics are categorized as bullish.

Cheers,

Mike

Good Afternoon,

We got some action on the STP today – a nice 1 gig bom haircut:

The trailing months also had modest cuts – clearly the RFC is getting the same weather forecast as Ansergy and the once again tipped their hand in this morning’s 10 day:

Given a 10 day dry outlook, and cool to cold, we’d surmise that more cuts in the front are on the way.

The daily shape of the associated STP energy suggests/reinforces that view:

It is striking the volatility the water pros have in those first 15 days…too much volatility in our opinion.  I still don’t buy into the steady cuts through the end of February – if its reality would make for a bullish Q1.    They already have this year’s forecast as the most bullish in the last four years:

Can’t argue with the relative values (versus prior years) but still think the amount of energy in this forecast is understated and I’d expect to see Jan and especially Feb get bumped at some point.

Cheers,

Mike

Good Morning,

Forget “Winter is coming”, it’s here.  Seattle is clocking in the mid-30s for lows and expected to get down to perhaps the high 20s; Portland  a bit cooler; even northern Cali will be chilly.

More interesting than a modest cold front is the predicted cool weather following Thanksgiving, and the dearth of precipitation.  I drove over the Cascades on Friday expecting to see the “resorts” open for skiing; instead I saw just a smattering of snow, and no major precip is forecasted over the next 10 days:

Trends are trends til they aren’t; the wet of late is morphing into the dry of now; call that bullish Mid-C.  El Nino, anyone?  The weekly 34 index punched a 3.1 last week; contrast the current beast with the previous big one, 97-98, which registered a 2.8 for the same week.  That 3.1 is off the charts as far as anomalies go – its no longer a debate whether the 15-16 El Nino is big, it will be the  biggest on record, at least as far as sea surface temperature anomalies go.  What it brings weather-wise remains to be seen, except we are seeing the NWRFC back down their water supply forecasts:

TDA is now at 92% of normal, off 2% from 94% a week ago.  Most of the positive anomalies are in British Columbia – great for our Canadian friends but won’t help the northwest utes much (and maybe explains why Powerex is dumping 1500 aMW into Mid-C …again).

It’s STP Monday today and I’m expecting an interesting forecast, one which reflects the cooling and drying of Mid-C.   I am expecting Dec to show modest drops (bullish) and perhaps  Jan-Mar drops as well – with one caveat – BPA will generate into this cold event which, if not already baked into the 10 day forecast, may generate more BOM/Dec water.  Let’s just see what happens this afternoon:

The NWRFC 10 day has been a good prognisticator and its tea leaves are suggesting Dec cuts, albeit a modest shearing.    Speaking of shearing, renewables have fallen off of the proverbial cliff:

On that aforementioned drive across the state last week I noted the wind mills standing tall and proud …and not spinning.  Doubt they will be spinning for another ten days given the current weather forecast.  Call that bullish north, but call the return of all the nukes bearish:

CGS had a hiccup over the weekend but now all six are at 100% – call it bearish south.   You know what would be cool?  If Ansergy laid out its fundamental sentiment on all of the items in one easy to read table …something like this:

Wow, that says “very bullish” for the northwest.  Wouldn’t it  be nice to be able to see which drivers are driving that sentiment:

So Mid-C has 57 bullish hydro drivers and just 6 bearish ones – what are those, you ask?

There you go, ask and answered.  All of the above will be added to our service this week and I’m pretty excited about that.  Each of the sentiments are derived from reports in the Fundy group then aggregated by type and hub.  We will be offering this report on both the website and as an email.

The recent dryness is starting to seep into the Ansergy term forecast causing blocks of energy to fall off, at least compared to a week ago:

I’d expect this trend to extend given no substantive precip in the 10 day forecast ..and with BPA expected to draft into this week’s cold.  BC Hydro is already drafting into the cold event and are now back to their exporting ways:

Call that bearish on the surface but this surge of exports is endemic of a more bullish Mid-C outlook, at least from the Canadian’s perspective, or perhaps they just received a lot of rain over the last few weeks and their run of river is running hard.

The DC line is showing signs of life, maybe …

Call it test power, call it what you like, but don’t call it completely down …maybe BPA is getting ready to bring it back early?

That’s all for now, enjoy your day and may the trading gods smile upon you.

Mike

Good Morning,

It’s shaping up for a cold Thanksgiving, the first breath of Winter will arrive on Monday, though it is short-lived:

This event is cold, teens on the east-side of the Cascades, but in the latest models don’t keep the cold around too long:

At best this acts as a reminder of what could be, but hasn’t been.  The cold weather, driven by that blocking high off the coast, keeps the northwest dry which may be more relevant than a three day cold spell.   This breakdown of the recent wet weather pattern could be the precursor to dry El Nino; who knows,  whether it holds remains to be seen.

The river forecast center has not reacted to the cold, it’s 10 day remains relatively unchanged:

I expect BPA to crank on its hydro plants to meet the increase in loads and I expect the RFC to jack it’s forecasts for next week  to reflect that reality, and they have the reservoir bullets now to meet several of these mini cold events.

Coulee is now at a four year high for this time of the year, a major reversal from where it has been the last four months, and speaks volumes towards the volumes of precip which has been realized over the last few weeks.  Seems most of that precip had a northern bent as the Canadian Columbia water supply forecast is now well above normal while most of the US basins are either normal or below:

That’s the thing about water supply, you never know where it will end, you only know where it is today, and today is healthy.  Next week’s cold snap will be a good barometer of how Mid-C will behave this winter as the loads should approach a typical winter peak:

That is about 2-3000 MW of new demand over climatology which drove a $5.00 rally in our forecast.  I’d expect day aheads to trade even higher than that premium as no utility wants to find itself holding the bag on Thanksgiving, but let’s see if the cold holds, or even enhances and extends itself.  There could be even more room for a longer and higher rally if weather stays dry/cold.

Though the DC is in maintenance until Dec 21 there is energy flowing on it, at least per BPA:

Not sure what to make of that, perhaps it’s just test energy, but if its ramping back put another car on the Mid-C bull train.  There is another train on the same track, however, and its heading in the opposite direction, at least in the south, and is led by the return of the Diablo unit and now the near full return of PV 2:

Call this about 2300 aMW (by the weekend) displacing gas units.   Renewables aren’t helping the cause, especially in light load, mostly at the Mid-C:

So what’s it all mean?  Who knows, everyone cares, but as I was once a betting man I’d say its bullish north, bearish south, and as Scott already suggested … cover your Dec Mid-C shorts, maybe go long – no, not maybe, go long.  On top of that I’d sell my SP-MC Dec and Q1 length (I don’t have any and nor should you).

Happy Trading!

Mike

Two new reports summarize current snowpack and current precipitation compared to normal.  Each basin links to historical charts for comparison to the last 5 years of data. Find them under Fundamentals > Hydro or by clicking on the images below.

[ezcol_1half]Current Water Supply – % of Normal[/ezcol_1half] [ezcol_1half_end]Historical Charts of Precip[/ezcol_1half_end]

[ezcol_1half]Current Snowpack – % of Normal[/ezcol_1half] [ezcol_1half_end]Links to Historical Snowpack[/ezcol_1half_end]

Good morning,

The STP, as expected, comes out bearish BOM but surprisingly neutral the balance of the strip:

 

Yesterday’s 10 day forecast  tipped the Portland prognosticator’s hand showing a big jump in the day on day forecast:

Surprisingly, and perhaps incorrectly, the Dec actually sustained a small cut (140 aMW).  You should expect next week’s STP to push up both BOM and Dec, unless the weather quickly reverts back to dry, but the forecast isn’t dry, in fact it is wetter than yesterday:

Check out the storm on the 18th, where did that come from?  Doesn’t matter where it came from, it’s where it will land that matters, and that is in the heart of Mid-C hydro production (see the forecasts for Boise, Pendleton, Spokane, and Kalispell).

But we digress, back to the STP, and this bearish BOM, though there is room for more bearishness, even 2014 had more BOM water:

Which suggests, further confirms, that next week’s BOM, and probably Dec, will show increases in hydro energy.    In closing the daily plot is worth looking at:

A big spike which quickly tapers back to the last five week’s values suggesting that the RFC has not allowed Dec to realize any impact from the Nov storms, probably a mistake, given that reservoirs are being recharged, snow is accumulating, and the ground is becoming saturated with moisture.

Surprisingly the BOM did not crush our foreasted prices as much as I would have expected:

Because of where Mid-C is in the Nov stack.  There is plenty of demand to keep gas on the margin, even with an additional 2000 MW of hydro.  It would take catastrophic precip to get gas off the margin, something that is not going to happen:

But perhaps the biggest risk to BOM and Dec prices are not fundamentals, though those are bearishly bad, it is the new found length BPA”s Slice customers are wearing, and as mentioned above, I’d expect them to get longer:

So if you see the northwest utilities start slapping bids around today you now know the reason … BPA just exercised it’s slice put.

Outlook – Bearish!

Mike

Good Morning,

The Mid-C is undergoing a material change in outlook driven by substantial precipitation, much of it coming down as snow, and more on the way.  The most recent weather forecast for the Mid-C shows another substantial storm striking where the production resides:

Note the storms on the 16th and 18th and keep in mind this is a production-weighted precip forecast.  Kalispel, MT is weighted 30%:

That is nearly a 1/2″ all of which comes down as snow in the Flathead and Kootenai basins.  Equally interesting is the departure from the forecasts ending last week.    The west side (Portland) will receive the brunt of the rain, and flooding will follow:

Again, it is not just the impressive volumes that stand out but the departure from last week’s forecasts.  The River Forecast Center sees this and their weekend update on the 10 day has turned materially bearish:

Watch for today’s forecast, it may be even greater than the weekend’s, and watch and expect today’s STP to put 500-1000 aMW into BOM, and probably half as much into Dec.    The cumulative precip realized in the northwest will go a long ways towards returning BPA’s reservoirs back to normal which will cast a longer-term bearish pall upon Q1, Q2, and possibly Q3.

Adding to the bearishness is the relatively warm weather across the northwest causing the seasonal load rally to be deferred into December, at least given the current 14 day outlook:

Ansergy’s forecasted price has been battered by the trifecta of falling demand (see above), rising hydro  and weak gas prices:

The good news is the Slice customers just got a lot longer in the front and just longer in the back:

All this November water, in the final analysis, does not make a water year and we would caution everyone to not hit the panic puke button, just yet.  It’s November 16, plenty of time for more drama to be played out on the water stage.  In fact, here is a bullish nugget for you:  the latest El Nino 34 index posted a 3.0, a new all-time high.  The same week in 1997 was a more modest 2.7, though it was  the previous all-time high.  I’ll still wager TDA and GCL end the water year below normal.

Expect another post later today on the STP but watch this morning’s 10 day …should tip their hand.

 

Mike

 

 

 

 

 

Good Morning,

I was surprised to see the NWRFC back off hydro in its 10 day forecast:

Especially next week; this weekend is just the typical shaping adjustments.  Given the substantial precip that is already falling, and what is expected over the next four days, I would have thought the govt would project more flows, not less.  One possible explanation is that the forecasted precip is less than what went into Monday’s STP.  Regardless of the true reason, this is a material change and worthy of watching today’s update to see if it is confirmed; if it is confirmed then we can expect Monday’s STP to be bullish … oh boy.

This theory, the one that expected precip is less than earlier forecasts, is somewhat borne out in today’s weather forecasts:

At least it is in the first few days, though on the 15th and 16th there is substantially more precip/snow than what was in Monday’s forecast.   While on weather, check out NP15’s forecast:

Projected rain is nearly double what it was the day before; perhaps El Nino really is really real?!?  NP is getting setup for some softening with Diablo now back and wind speeds picking up which will drive a rally in their renewables.

I’ll update this post when the new RFC 10 day gets published.

Enjoy your weekend,

Mike