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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: November 14th, 2019  (Wk 46)

 

POWER MARKETS

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WEST Since the beginning of November, index prices have been relatively strong in CAISO as above-average temperatures have driven cooling load in Southern California, deration of a key AC transmission line has limited import flexibility, and various generators have been on planned and unplanned out-ages. Term prices have also rallied on high natural gas power burns due to the uptick in demand.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending November 8, U.S. inventories increased by 3 Bcf, well under the expected injection of 9-15 Bcf. Total stockpiles now stand at 3,732 Bcf, up by 15.1% from a year ago but only 0.1% above the five-year average for the same week.

The prompt-month NY-MEX contract had traded generally around $2.650-$2.670/MMBtu before the report but fell as low as $2.625/MMBtu within the first 15 minutes afterward. By 11 a.m. ET, December futures had regained $0.014/MMBtu to reach $2.639/MMBtu, nearly 4 cents above Wednesday’s closing price but still below the pre-report range.

ERCOT   Term prices have given up a great portion of their gains over the last two weeks. Real-time prices have settled in the mid-$20s/MWh for the week, and basis has cleared over $1/MWh in the Houston, North, and South Zones. However, with the cooler weather over the last few days, West Zone basis is still over $29/MWh, mainly in the nighttime and morning-ramp hours.

EAST  As the first taste of winter arrived this week, Real Time prices in PJM West Hub closed Wednesday (the coldest day of the week) above Day Ahead by $24.59/MWh. Under-forecasting of the morning ramp in PJM that day resulted in an hourly spike of $595.83/MWh for HE8, but the market oth-erwise stayed within expectations. Although temperatures should return to normal early next week to finish out November, forecasts show December bowing with a cold start to keep prices elevated.

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WEATHER 

Temperatures will be above average in the western half of the United States but low in the east-ern half over the 1-to-5-day forecast period. Heat pockets and Santa Ana winds will take place across the Southwest.

In the 6-to-10-day forecast period, temperatures should generally normalize across the country. In the Southwest, the heat and winds should give way to measurable rain.

A slight warming trend is expected across the Great Plains during the 11-to-15-day forecast period while more seasonable weather is anticipated for the rest of the U.S.

 

 

 

 

 

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ARCTIC SHOT BRINGS LOW TEMPS AND HIGH PRICES

 

A mass of cold arctic air moved over much of the United States this week bringing record low temperatures and increased demand for heating. The National Weather Service marked 100 low temperature records broken Wednesday and observed that much of the southern and eastern US saw temperatures drop more than 40° between Monday and Tuesday - shown above. - Depicted: Temperature change between Monday and Tuesday

 

 

Energy markets reacted to the weather accordingly, index prices jumped in PJM, MISO, New York and New England. The PJM Western Hub saw its highest index prices since January while Henry Hub benchmark natural gas futures briefly jumped above $2.90 / MMbtu. Fortunately for energy buyers, record cold in November is much different than record cold in Q1. Index prices in most regions spiked between $30 - $100 / MWh over the past few days whereas the polar vortex spanning January and February 2014 saw prices spike into the hundreds of dollars per MWh.


Some may wonder whether the record November cold dispels global warming, but it may actually affirm it. The cold shot of polar air followed a dip in the jet stream which flows from West to East across North America. In a 2015 Environmental Research Letters publication, scientists Jennifer Francis and Stephen Vavrus found evidence the jet stream is becoming more “wavy” as a result of rapid Arctic warming – possibly explaining how frigid polar air made its way so far south across the US. The authors explained “…as the Arctic continues to warm faster than else-where in response to rising greenhouse-gas concentrations, the frequency of ex-treme weather events caused by persistent jet-stream patterns will increase.” In fact NASA reported arctic sea ice coverage in 2019 is the second-lowest on record.


Of course most energy buyers simply want to know whether this cold snap will persist. Short-term forecasts show average to above-average temperatures across the country beginning the weekend before Thanksgiving and the National Weather Service last month predicted warmer than average winter temperatures for much of the US. However it’s notoriously difficult to predict weather outside of a two week window, a similar cold shot in January and February would likely have a much more dramatic effect on energy markets.

 

 

 

Previous Weekly Market Reports: Archive

 

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