Weekly Energy Market Updates by Region - Archive




Issue week: June 18th, 2020  (Wk 25)





WEST As demand in California has rebounded substantially over the past three weeks with the loosening of restrictions, the CAISO spot market has seen increases. In contrast, term prices are lower on ac-count of a decrease in NYMEX natural gas prices for the balance of the year due to expectations of stabilizing load. Fears of a second wave of the pandemic, which could effect a return to lockdown sta-tus, have also had a negative effect on forward prices.

ERCOT  Term prices fell this week by $0.20-$0.50/MWh, depend-ing on the term, as the drop in natural gas prices outweighed the cor-responding rise in heat rates. Despite high cooling load, real-time prices managed to stay in the high $10s/MWh to low $20s/MWh, thanks to ample wind generation. The ORDC adder has been below $0.05/MWh for the week, indicating little, if any, scarcity.

EAST Demand in the Northeast has cooled off along with the weather this week. DA and RT LMP prices are back in the mid-to-high $10s/MWh across the main trading hubs, and DART spreads are minimal.







Compounding the normal springtime ebb in demand for oil, coronavirus-related shutdowns have contribut-ed to the recent drop in the price of crude in the for-ward curves. Unsurprisingly, the fall in price has caused a dramatic drop in supply as producers have started limiting production and, in some cases, per-manently shut down drilling wells in response. How-ever, more significant could be the long-term effects of the price dive on the oil and, in turn, natural gas industries.

The upheaval in the oil market has become a cause for concern among bankers. Loans to oil drillers are expected to drop by tens of billions of dollars. In-deed, the battering taken by the oil market lately makes a renewed commitment to achieving old in-vestment highs unlikely, even if prices roar back. Moreover, whether or not investment in oil resumes, the general political hostility toward shale drillers may continue to suppress oil production, and, because a significant amount of natural gas output is linked to oil production, the viability of that energy commodity is jeopardized as well.

Ironically, such dynamics may create an opening for coal, of all things, to make somewhat of a comeback. As the cleaner-burning fossil fuel, natural gas had steadily displaced coal as the preferred balancing re-source to renewables (whose growth is expected to continue), but a potential drop in supplies of natural gas could raise its prices—especially in peak-load conditions—and make coal more attractive again. As this possibility illustrates, the recent turmoil for oil could unleash a series of disruptions to the entire energy sector.




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