banner_market_intelligence_1440x441

MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: August 8th, 2019  (Wk 32)

 

 

 

POWER MARKETS

 

wk32_Chart1_Energy_Market_Intelligence_Commercial_2019wk32

WEST In the index market, the mild temperatures recently gifted by Mother Nature have lowered August demand below normal. Consequently, Day Ahead ATC has averaged $35.37/MWh in SP15 and $32.15/MWh in Mid-C this week. The lack of significant heat events on the horizon in August should continue to suppress index prices. In the term market, prices have fallen along with gas prices in SoCal Citygate, which have dipped with the comple-tion of work on two pipelines that will help stabilize regional supply.

NATURAL GAS 

The EIA reported Thursday morn-ing that, for the week ending Au-gust 2, U.S. inventories increased by 55 bcf, within analysts’ predict-ed range of 55-67 bcf. Total stock-piles now stand at 2,689 bcf, up by 14.6% from a year ago but 4% below the five-year average for the same week.

Although the reported injection was larger than both the one reported a year ago and the five-year aver-age, NYMEX prices initially pushed higher for every active trading month through October 2021 this morning. The largest gains were in the front months, where both Sep-tember and October were up by $0.057 at $2.140/MMBtu and $2.156/MMBtu, respectively. The back months, comprising the sec-ond half of 2020 and most of 2021, increased marginally.

SoCal Gas announced that work is complete on pipelines L2000 and L2001, which will now enable an additional 0.15 bcf to flow into its system to stabilize storage levels to increase flexibility and balancing in the region. SoCal basis was down by approximately a dime in the near term but flat out to the 60-months term. PG&E basis was flat for the same periods.

ERCOT  Term prices have climbed by $0.50-$1.00/MWh over the week. Specifically, the summer term price has climbed by $4-$8/MWh out the curve, thanks to a combination of extraordinarily high real-time prices and an ORDC adder of nearly $43/MWh, which has propelled the MTD average to nearly $90/MWh. In the West Zone, the MTD average is currently just under $130/MWh because of a line outage last weekend. Continuing high tempera-tures may drive RT prices higher next week, but wind generation is projected to be ample.

 

EAST The on-peak index price in PJM West Hub has averaged $31.10/MWh this week. Prices are calming down from previous weeks this summer as more normal weather returns to the region. As long as no more oppressive heatwaves come through, prices should stay relatively stable for the rest of the summer.

Chart1

Map1

Map2

Chart2


WEATHER 

In the 1-to-5-day forecast period, Texas and the South will be hot while temperatures in California and the Pacific Northwest will be slightly below average.

The heat will persist in the South during the 6-to-10-day forecast period. Temperatures should be below average in the Northern Great Plains.

Temperatures are expected to be above average throughout most of the country over the 11-to-15-day forecast period.

wk32_Chart2_Energy_Market_Intelligence_Commercial_2019wk32

 

TREASURY YIELDS SIGNAL POSSIBLE TROUBLE AHEAD…AGAIN

 

The U.S. yield curve, like yield curves around the globe, has inverted once again. This is not the first such inversion of the year but may be the most significant, stoking even more apprehension in the already unstable U.S. stock market.

The yield on the 10-year Treasury note has dropped around 1.6% this week (as shown in the chart below from a report by Thomas Franck of CNBC on Wednesday) would not be a major red flag in and of itself. However, it becomes one when coupled with the higher current yield on the short -term three-month bond of approximately 2%. Although many claim that this circumstance does not absolutely presage a recession, it has historically been a good start to one. Colby Smith and Peter Wells reminded readers of The Financial Times on Monday that an inverted yield curve preceded every previous U.S. recession of the past 50 years.

Conventional wisdom attributes most of the recent panic sending U.S. investors scurrying from equities to the relative safety of bonds to escalation of President Trump’s ongoing trade war with China. Just this week, the President slapped new tariffs on another $300 billion of Chinese imports, and Beijing swiftly retaliated not only by announcing the suspension of purchases of U.S. agricultural products but also by depreciating its currency against the dollar, dealing another potentially significant blow to the U.S. economy.

Salvatore Babones of The National Interest chooses instead to emphasize the preponderance of positive U.S. economic metrics and insists on the righteousness of Trump’s goals and the favorability of the U.S. position in the dispute. He asserts, “The United States, at worst, has not been affected by the trade war …The only one losing is China.” For his part, Trump has tried to downplay the impact of the trade war on the economy by criticizing the Federal Reserve, which lowered the federal funds rate from 2.5% to 2.25% last month despite continued economic growth, for not cutting interest rates fast enough.

The U.S. and the rest of the world will have to wait and see how the trade war plays out, which school of thought is correct, and whether the economy truly is strong enough to weather the storm.

 

 

 

 

 

Previous Weekly Market Reports: Archive

 

Disclaimer: This report is for informational purposes only and all actions and judgments taken in response to it are recipient’s sole responsibility. Champion Energy Services does not guaranty its accuracy. This reports is provided ‘as is’. Champion Energy Services makes no expressed or implied representations or warranties of any kind. Except as otherwise indicated in this report, this report shall remain the sole and exclusive property of Champion Energy Services and shall be free from any claim or right, license, title or interest. Champion Energy Services shall not be liable for any direct, indirect, incidental, consequential, special or exemplary damages or lost profit resulting from this report.