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MARKET TREND ANALYSIS

Weekly Energy Market Updates by Region - Archive

 

 

 


Issue week: June 17th, 2021  (Wk 24)

 

POWER MARKETS

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WEST  Excessive heat warnings have driven demand up across the Western Interconnection and, for reliability purposes, forced CAISO to cut exports to the Desert South-west, where the highest Day Ahead prices have been logged because of insufficient regional capacity to meet peak demand. The Palo Verde trading hub in Arizona and Mead hub in Nevada have had to send price signals high enough to incentivize non-CAISO-sourced power to flow into their regions. Consequently, the on-peak Day Ahead LMP cleared around $1,420/MWh today.

ERCOT  Term prices have been mixed this week, still trading well above last week’s levels despite retreating from the highs of this Monday and Tuesday. Summer heat rates have risen as demand has stayed high, intermittent resources have per-formed below expectations, more thermal units than expected are down, and natural gas prices have increased. Meanwhile, real-time prices rose this week on days 13 and 14 during the super-peak hours as typical summer conditions have materialized. In addition, the ORDC adder has climbed near $4.00/MWh, well above that of June 2019 and June 2020.

EAST Like the weather in some parts, prices have cooled off this week. Day Ahead has fallen by approximately $5/MWh in all main hubs except MISO’s Indiana Hub and PJM’s NI Hub. At Indiana Hub, where the weather remains hot, the Day Ahead average is $36/MWh (roughly $3/MWh above last week’s average) and the DART spread is almost zero. At NI Hub, both Day Ahead and Real Time have barely moved since last week, Day Ahead averaging $31/MWh and Real Time averaging $33/MWh.

NATURAL GAS 

The EIA reported Thursday morning that, for the week end-ing June 11, U.S. inventories increased by 16 Bcf, although PG&E had revised its figures down by 51 Bcf because of a shift in how it measures storage. Without that adjustment, inven-tories increased 67 Bcf, a smidge below the expected 68 Bcf. Total stockpiles now stand at 2,427 Bcf, down by 15.7% from a year ago and 4.9% below the five-year average for the same week.

After the validating storage re-port, the NYMEX prompt month of July fell by $0.04/MMBtu from yesterday’s close. Nonetheless, it has risen by approximately $0.08/MMBtu since last week, and all of the other forward strips are modestly higher as well. Warm weather and the attendant increase in power generation over the last week has put upward pressure on NYMEX prices and regional hubs, especially out west. In-deed, cash prices for SoCal Citygate have traded above $5/MMBtu this week amid the sus-tained heatwave.

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WEATHER 

Record-challenging heat will punish the West in the 1-to-5-day forecast period. Temperatures will reach triple digits in Sacramento.

While temperatures should fall below normal in the Mid-west during the 6-to-10-day forecast period, the Pacific Northwest should be toasty.

While Texas can expect some summer rainfall in the 11-to-15-day forecast peri-od, the Midwest and East should remain warm.

 

NATURAL GAS FEELING THE PRESSURE

Although the recent rebound in oil prices to $70 per bar-rel is surely traceable, at least in part, to a resurgence in demand so far in 2021, the biggest influence has been cuts in oil production by OPEC. By creating an opening for an increase in domestic oil production, this development has engendered optimism not only in U.S. oil producers but also in suppliers of natural gas, a natural by-product of oil. Indeed, the graph below from the U.S. Energy Information Administration shows that the number of operational natural gas rigs has grown steadily over the past 12 months after a huge contraction over the previous 18 months.

However, despite the proliferation of active rigs and re-cent strength of natural gas prices, uncertainty persists in the natural gas market for some reason, whether miscellaneous supply chain issues, ongoing political opposition to fossil fuels, or some other unforeseen cause. If the rig count shrinks again or natural gas supplies are otherwise threatened, energy prices for both natural gas and electricity could rise even higher than they currently are. As always, vigilance is prudent to weather price shocks.

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