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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: January 16th, 2020  (Wk 3)

 

POWER MARKETS

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WEST The grid has done a good job of keeping index prices from spiking amid the cold weather over the past few days. Term prices are down for the week because of a shift in long-term forecasts to a warmer outlook and an increase in snowpack in the Sierras and Pacific Northwest, which has boosted the expected summer hydro production well above original projections.

NATURAL GAS 

The EIA reported Thursday morning that, for the week end-ing January 10, U.S. inventories decreased by 109 Bcf, just above the predicted withdrawal range of 87-106 Bcf. Total stock-piles now stand at 3,039 Bcf, up by 19.4% from a year ago and 5.2% above the five-year aver-age for the same week.

After news of the slightly larger-than-expected withdrawal, NY-MEX contracts through Decem-ber 2021 traded almost uniformly higher, although the gains were marginal at only $0.010-$0.018/MMBtu. The February front-month contract was up by $0.016/MMBtu from its closing price on Wednesday to $2.136/MMBtu at 10:30 a.m. Pacific Time. Generally, prices remain much lower than they were last year. For example, after the re-lease of the storage report 52 weeks ago, the NYMEX contract for February 2019 traded at $3.469/MMBtu. Basis at PG&E Citygate is approximately $0.25/MMBtu higher today than a year ago, but basis at SoCal Border is $0.72/MMBtu lower.

 

ERCOT   With winter yet to emerge fully, real-time prices have settled in the high $10s/MWh this week. Term natural gas prices fell more than heat rates climbed, lowering fixed prices for the balance of this year. ORDC remains nonexistent for the month, but ongoing drought condi-tions could raise real-time prices above expectations from Q2 to Q3.

EAST With the first below-average temperatures of the year should come a clipper storm to New England on Friday, and the Day Ahead LMP in Mass Hub has risen by $15/MWh from yesterday to $45.37/MWh in re-sponse. However, the general lack of winter weather has continued to push down the front of the curve. The term price for February at Mass Hub has dropped by approximately $5/MWh ATC in the last week.

 

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WEATHER 

A cold front will cross the Great Plains in the 1-to-5-day forecast period while seasonably average temperatures will be the norm in the rest of the country.

Over the 6-to-10-day forecast period, temperatures should be generally above average west of the Appalachian Mountains, but the Atlantic Coast should cool down slightly.

A storm is expected to sink temperatures throughout the South Central states during the 11-to-15-day forecast period to close out January.

 

 

RECORD HIGH TEMPS BRING RECORD LOW PRICES

Although winter may be considered in its early stages we have already seen both high temperature and low price records broken across the midwestern and eastern parts of the United States. As shown in the table below - with data compiled
from the National Weather Service and Weather Underground - the winter “heatwave” saw recent weekend temperatures soar into the 60s/70s for parts of the country where January readings generally stay below 40 degrees Fahrenheit.

As a result of the extreme and unseasonable heat, new January low price records were set in the Midwest and East. The price below represents the simple average of all Day Ahead LMPs at the respective Hub or Zone for a single day, the prices are record lows for any January day in history.

Countering this “bearish” start to winter, the famed Farmers’ Almanac has called for below average temps in February and March. Indeed, short term forecasts are calling for more seasonable weather over the next two weeks and LMPs are already trending higher. Energy market participants have a vigilant eye towards daily weather reports – wondering if warm weather will keep prices cool or if frigid temps will show up and bring price spikes with them.

 

 

 

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