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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: October 31st, 2019  (Wk 44)

 

POWER MARKETS

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WEST Unseasonably cold weather has boosted demand in Mid-C, where the Day Ahead average since Monday is $7.50/MWh above the Day Ahead aver-age in SP15. Consequently, less electricity is flowing from the Northwest into California, for it is more economical for that power to stay home. Term prices for calendar years 2020 and beyond are down as market participants maintain their bearish outlook amid strong natural gas storage levels and modernized pipelines, which have the grid in good shape for high-demand events in the future.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending October 25, U.S. in-ventories increased by 89 Bcf, smack in the middle of the expected range of 75-94 Bcf. Total stockpiles now stand at 3,695 Bcf, up by 17.8% from a year ago and 1.4% above the five-year av-erage for the same week.

Prices initially reacted to the strong storage figures by dropping slightly in the front month but eventually re-turned within a couple of cents of yesterday’s closing price for the rest of the day. The December contract ap-proached $2.71/MMBtu. Most of calendar year 2020 was down by trace amounts, alt-hough a few months were positive or unchanged. Bear-ish by most measures, this market activity appears to be driven more by the cooler weather than by the robust inventories.

ERCOT  Despite some volatility in the mornings this week due to load ramp and a unit outage, 7x24 real-time prices averaged mostly in the low to mid-$20s/MWh. However, basis in the West Load Zone remains strong, aver-aging around $20/MWh for the week. The cold front that moved across the state yesterday should moderate loads and limit price volatility over the next several days. Strip term prices for CY2020-2022 rose by $0.50-$1.00/MWh down the curve on the strength of NG coupled with heat rates holding firm.

EAST  The market has wavered with the daily weather forecasts. In the begin-ning of the week, forecasts of colder weather caused the curves to climb by as much as $2/MWh each day. However, the curves softened today as the weather was not projected to be so cold in the latest round of forecasts.

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WEATHER 

Temperatures will be below seasonal averages throughout the United States in the 1-to-5-day forecast period.

Most of the country should be cool during the 6-to-10-day forecast period, although the Great Plains should have pockets of especially frigid weather and the West is expected to be mild.

The states west of the Rockies will heat up over the 11-to-15-day forecast period while the rest of the country will endure temperatures 5 to 15 degrees below November averages.

 



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COAL’S GRIM FUTURE

 

On this Halloween the future of the US coal industry is as grim as ever. The United States is on pace for its lowest coal consumption in 40 years (as shown in the chart below) and the nation’s largest private coal mining company - Murray Energy - filed for bankruptcy Tuesday.

Company founder Robert Murray has been an ardent supporter of President Donald Trump and through Murray Energy has donated at least $1 million to a pro-Trump PAC. The president in turn fought hard for Murray and coal, he appointed Andrew Wheeler – a former lobbyist for Murray – to EPA chief and pushed unsuccessfully for coal subsidies through a grid resilience order. Ultimately the president’s efforts were not enough for Murray and many others in the coal industry, record levels of low cost generation from gas and renewable sources has pushed wholesale electricity prices below the cost of coal generation across the country.

Regional politics are hastening coal’s decline in the power sector, 29 states have adopted renewable energy mandates while 7 states will require 100% clean electricity by 2050 according to the EIA. Internationally, Platts reports that coal demand remains healthy in Asia. Yet despite the export ambitions of coal producing landlocked states, all three Western Seaboard states are pushing back on new marine terminals for coal shipments.

Perhaps emblematically, self-proclaimed “king of coal” Robert Murray, age 79, stepped down as Murray Energy CEO Tuesday. With domestic demand dwindling and new exports questionable, the future holds little hope of any meaningful recovery for the US coal industry.

 

 

 

 

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