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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region


      


Issue week: January 21st, 2021  (Wk 3)

 

POWER MARKETS

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WEST Index prices have been relatively soft in CAISO and Mid-C because of mild temperatures and strong hydro generation in the Pacific Northwest, but the recent warmth responsible for the strong hydro output has also eroded the ac-cumulated snowpack. Consequently, the fear premium for Q3 2021 and CY2022 remains as market participants fear that below-average water levels throughout the region will further tighten supply during the nightly ramp. None-theless, forward prices have dropped this week on revised forecasts calling for warmer weather across the nation.

ERCOT  Save a few triple-digit hourly prints here and there, real-time prices for the month to date have been relatively low. The ORDC adder for January has also been minimal. On the other hand, term prices have been mixed this week, falling in the front of the curve but rising in the back. As the mild winter raises the possibility of an especially dry summer, particularly in the North and West Load Zones, term prices for summer could take a bullish turn.

EAST Prices have remained stable yet again this past week, although DART spreads have increased notably in ISO-NE and NYISO. The Real Time average at ISO-NE’s Mass Hub is $4.50/MWh lower than the Day Ahead average of $36/MWh. Meanwhile, in both NYISO’s Hudson Valley and NYC, the Real Time average is $5.60/MWh below the Day Ahead average of $31/MWh.

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NOT BIDEN ANY TIME IN REMAKING U.S. ENERGY POLICY

Having emphasized a theme of unity in his inaugural address, President Joseph Biden is bound to walk a fine line as he strives to balance the interests of his party with those of both the U.S. economy and the country’s foreign partners. He certainly tested the limits of international concurrence with this sentiment on his first day in office by revoking the permit for construction of the Keystone XL pipeline to begin his energy policy.

Biden has come out strongly against climate change, and, de-spite a pledge by Keystone XL to purchase enough renewable energy to offset the pipeline’s power usage, nixing the project was always a priority. Of course, because the pipeline was supposed to transport approximately 800,000 barrels of crude per day to the Texas Gulf Coast from the Canadian province of Alberta, Canada has much invested in it and, not surprisingly, reacted to the move with a degree of resentment. Whereas Canadian Prime Minister Trudeau diplomatically expressed mere disappointment in Biden’s executive order, Alberta Premier Jason Kenney was more candid, charging, “The leader of our closest ally retroactively vetoed approval for a pipeline that exists and which is co-owned by [the] Canadian government, directly attacking by far the largest part of the Canada U.S. trade relationship, which is our energy industry and exports.”

In other energy news, OPEC promised deeper relations with the U.S. despite Biden’s likely hostility toward crude oil. Although the clean-energy movement will surely pick up steam under the Biden Administration, the U.S. will continue to play a prominent role in oil markets—both because of its customarily large demand and because of its considerable production capacity due to fracking—so markets will closely monitor how the President treats the oil industry both domestically and internationally. For its part, OPEC has unexpectedly continued its curtailment of oil production, which has helped stabilize oil prices against the persistent weakness in demand. Oil prices have also rallied as stimulus talks and expanding vaccine deployment stir hope for an economic rebound and stimulate overall demand.

Such positive developments could boost natural gas and power prices as well. Hopefully, President Biden will not to let his agenda backfire by endangering the heart of the U.S. economy.

 

 

 

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