Weekly Energy Market Updates by Region - Archive




Issue week: March 12th, 2020  (Wk 11)





WEST In the index market, Day Ahead spot prices have risen over the past few days as overcast skies across Southern California have reduced solar generation and increased the implied heat rate. Term prices are also up in Mid-C and CAISO on the rise in NYMEX natural gas prices.

ERCOT  The average of 7x24 real-time prices for the week is around $16/MWh across all zones except the West Load Zone, where continuing congestion and line outages have bumped the average to $49/MWh. Both fears of demand destruction due to the coronavirus and turmoil in the crude oil markets have dragged prices for peak summer (Jul-Aug) 2020 and the prompt 12-month 7x24 strip down by $25/MWh and $2/MWh, respectively.

EAST Averaging in the mid-$10s/MWh to low $20s/MWh this week, DA and RT prices have printed even lower than last week. They have been especially low in NYISO Zone A, where the aver-age is between $13/MWh and $14/MWh.



The EIA reported Thursday morning that, for the week ending March 6, U.S. inven-tories decreased by 48 Bcf, at the low end of but still within the projected with-drawal range of 45-66 Bcf. Total stockpiles now stand at 2,043 Bcf, up by 63.8% from a year ago and 12.5% above the five-year average for the same week.

April 2020 contracts traded up by as much as 3 cents to $1.873/MMBtu in the 30 minutes following the stor-age report at 10:30 a.m. ET. However, as the trading day continued and a torrent of news related to COVID-19 affected all aspects of the economy, they later fell by nearly 6 cents to $1.814/MMBtu. All active trading strips out to 12 months finished today approximately 2 cents in the red against yesterday’s close.












As the COVID-19 outbreak has spread rapidly around the globe (and within the U.S.) in recent weeks, the Chicago Board Options Exchange Volatility Index (VIX) has spiked to levels not seen since 2008, when world markets and economies infamously suffered a lot of pain before stabilizing. The VIX for March 12 is shown above.

Commonly dubbed “the fear index,” the VIX utilizes options prices to gauge expectations of future market volatility to offer guidance to participants understandably anxious to know both how long the instability may last and how bad it could become. As long as the coronavirus continues to wreak havoc on world health and chill all varieties of economic activity, the surge in this particular index is likely to last. Indeed, developments in the broader U.S. society over the past 24 hours—including the prohibition on incoming flights from mainland Europe, closure of numerous K-12 schools and universities throughout the U.S., suspension of the remainder of the NBA season, and announcement of positive coronavirus tests by actor Tom Hanks and his wife—may be reflected in the VIX before long.

On the other hand, that the VIX is currently reminiscent of 12 years ago does not necessarily suggest that a repeat of that scenario is inevitable. As President Trump said last night in his televised address, the present situation, unlike that one, is not a financial crisis and the country’s economic fundamentals remain strong. The volatility may persist across markets and continue to slow growth in many economies around the world over the coming weeks and months, but that trend could dissipate as quickly as it has grown. Once human ingenuity has prevailed over this threat, as it has over similar ones throughout history, the fear should subside and the fever will break.





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