Weekly Energy Market Updates by Region - Archive




Issue week: April 23th, 2020  (Wk 17)





WEST In the term market, prices for Calendar Year 2021 are up slightly because of strong NYMEX natural gas prices and a downward revision in the forecast of the amount of water available to hydroelectric generators in the Pacific Northwest dur-ing the summer.

ERCOT  With mild weather and limited congestion across zones this week, 7x24 real-time prices have continued to average under $20/MWh. Congestion in the West Load Zone has continued its moderating trend as basis there has aver-aged less than $1/MWh again this week. Despite slightly higher peak loads weighted more to residential since the stay-at-home order was put in place, aver-age loads appear to be down by approximately 2-3% after accounting for changes in weather. In the term markets, non-summer months have risen down the curve solely because of the ongoing increase in NG prices. Nonetheless, overall term prices for CY2020 are down by $0.50-$1.00/MWh as summer prices have fallen on fears of reduced demand, which have more than offset the rise for non-summer months. August 2020 5x16 prices have dropped by $17/MWh from last week.

EAST The marginal DART spreads have continued this week in both ISO-NE and NYISO. However, last weekend in ISO-NE, RT averaged $3.30/MWh higher than DA across zones because of strong load well beyond forecasts. Similarly, in the southeastern NYISO zones, RT printed above DA by an average of $6.90/MWh over the weekend.










The big story in the markets this week is the freefall in world oil prices, exemplified by the plunge in the West Texas Intermediate (WTI) price of May futures to negative $35 per barrel on Monday (shown in the chart below from CME Group). As the coronavirus has dried up demand in a global market already oversupplied, in part, because of the now resolved feud between Russia and Saudi Arabia, traders unable to take physical delivery and lacking available storage were able to sell their financial positions only at negative prices. Against such a backdrop, those in the natural gas and power markets may wonder whether the decline of oil is going to take them down with it.

Fortunately, oil’s woes may not impair the price of natural gas or power produced from natural gas in the short run. If anything, natural gas prices may actually increase. Although natural gas has also suffered from a bit of a supply glut recently, demand for it and the electricity that it generates has not waned nearly as much as has demand for oil. Furthermore, because much of the natural gas produced over the last few years has been “associated” natural gas, produced as a byproduct of oil drilling, gas production should naturally pull back as market forces curtail oil production in the U.S. All else being equal, gas prices should then rise.

The biggest bump in gas and power prices is likely to occur later in the year. Of course, if industries remain shut down for the long haul, they may ultimately just retreat to a statistical average.





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