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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: September 19th, 2019  (Wk 38)

 

POWER MARKETS

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WEST The Day Ahead ATC average for September is now $37.50/MWh in SP15 and $30.39/MWh in Mid-C. The Needles gas pipeline outage will begin decreasing available backbone transportation service capacity from the North Zone today but, in light of forecasts calling for mild weather for the rest of the month, should not have a bullish effect on prices as long as Mother Nature does not change her plans. In the term market, prices have dipped after SoCal Gas updated its critical maintenance schedule with news that line 235 is expected to return online on October 14, which has alleviated fears that the outage would last into winter.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending September 13, U.S. inventories increased by 84 bcf, just above the expected range of 73-82 bcf. Total stockpiles now stand at 3,013 bcf, up by 14.5% from a year ago but 2.4% below the five-year average for the same week.

The front-month NYMEX contract dropped by $0.10/MMBtu after the release of the storage report, apparent-ly in response not only to the inventory figures but also to forecasts of slightly cooler weather. In fact, all active months through July 2021 were trading down, but a few months on the back end of 2021 were up slightly. Sep-tember cash prices at both PG&E Citygate and SoCal Citygate were almost identi-cal at nearly $3.145/MMBtu.

ERCOT  Real-time prices have softened this week, the MTD average falling by $2/MWh since last week. Both term gas prices and heat rates are relative-ly unchanged for the week. With the worst of summer in the rearview mirror, prices should continue to stabilize, barring a late-season heatwave during seasonal maintenance on generation units.

EAST Thanks in large part to late-summer heat over the last few weeks, the Real Time average for PJM West Hub thus far in September is now $29.67/MWh, much higher than the August average of $23.49/MWh. With more heat forecast through the end of the month, that average may rise higher still.

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WEATHER 

In the 1-to-5-day forecast period, temperatu res are expected to be above average east of the Rockies but below seasonal averages along the West Coast. Moisture from Hurricane Lorena may reach the Southwest.


The high temperatures will persist in the eastern half of the U.S. du ring the 6-to-10-day forecast period, particularly in the south eastern quadrant.


The heat should continue in the Midwest and East over the 11-to-15-day forecast period. In contrast, th e Pacific Northwest should be unseasonably cool.


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OIL PRICES RECOVER AFTER ATTACK IN SAUDI ARABIA

In the largest attack of its kind in the history of Saudi Arabia, drones carrying explosives significantly damaged both a key oil-processing plant and the second -
largest oil field in the kingdom last Saturday. The strike reduced the country ’s crude production by 5.7 million barrels per day, approximately half of its total production
capacity.

Facing uncertainty after suddenly losing 5% of the global supply of crude, markets initially panicked. Oil prices spiked Monday morning. For example, the chart below
from Bloomberg Markets shows Monday ’s WTI record high of $62.90 per barrel.

Fortunately, as reported by Jodi Shafto of S&P Global Market Intelligence, Saudi Arabia’s Energy Minister said Tuesday that the country had restored 50% of its lost
oil output, expected to operate at nearly full production capacity by the end of September, and should resume full capacity in two months. Recovery of global oil
supplies looking much earlier than initially anticipated, oil prices have since plunged from their Monday surge.

As multiple reports of Iran’s possible role in the attack have come to light, this ultimately fleeting disruption has nonetheless raised concerns about the impact of
geopolitical affairs on the oil sector, which remains volatile despite Saudi Arabia ’s plan to resume full production so quickly. Evercore ISI analyst Doug Terreson foresees
that “the geopolitical risk would remain reflected along the forward curve. ” Indeed, Nathan Bomey of USA TODAY reported that the average price of gasoline in
the U.S. rose by 3 cents between Monday and Tuesday and could increase even more in the coming weeks.

Such tensions in the Middle East emphasize the importance of the growth of the U.S. as a major producer of oil in its own right. The economic fallout from this incident
might be far worse without it.

 

 

 

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