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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: April 23th, 2020  (Wk 17)

 

POWER MARKETS

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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.

NATURAL GAS 

The EIA reported Thursday morning that, for the week end-ing April 17, U.S. inventories in-creased by 43 Bcf, comfortably within the expected range of 11-57 Bcf. Total stockpiles now stand at 2,140 Bcf, up by 63% from a year ago and 20.5% above the five-year average for the same week.

An anticlimactic storage report plus a short-term forecast pre-dicting warmer weather had the May front-month NYMEX con-tract trading at $1.866/MMBtu, lower by $0.073/MMBtu from Wednesday’s close, as of 10:00 a.m. PDT. The remaining months of 2020 and Q1 2021 were also down from yesterday. Beyond that, however, the last nine months of 2021 and all active-trading months of 2022 were higher. Regional basis prices in California rose from yesterday for the near term through five years out at both PG&E Citygate and SoCal Border. Basis at PG&E was around $0.060/MMBtu; at SoCal Border, it approached $0.080/MMBtu. April cash prices at PG&E Citygate and SoCal Citygate also showed gains.

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WEATHER 

Temperatures will be above average in the western half of the U.S. over the 1-to-5-day forecast period. Southern California will be especially warm.

The 6-to-10-day forecast peri-od should feature record sea-sonal heat in the Southwest, but a potential storm system may bring cool weather to the eastern half of the U.S.

During the 11-to-15-day fore-cast period, the western half of the country should stay hot while the Great Lakes region should cool down.

 

 

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WILL OIL LEAVE A SLIPPERY SLOPE FOR NATURAL GAS?

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.

 

 

 

 

Previous Weekly Market Reports: Archive

 

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