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Tuesday Feb 25, 2020   
Each month the EIA puts out their Drilling Productivity Report. In the publication they detail current and forecasted production along with a count of drilled but uncompleted wells (DUC) across the Lower 48. These DUC wells are available in the producer inventory for extracting natural gas. Typically they only need a well head and gathering connections in order to push volume into the pipeline stream. Since May of 2019, the Lower 48 DUC count has dropped from 8,568 to 7,658 wells which means the producer community has stopped building inventory and is now working off the well count in order to keep natural gas volumes stable.  But if you break down the DUC count by region you can see that there is a bigger story. The Appalachia region, which represents the Marcellus and Utica ... » read more
Monday Feb 24, 2020   
Growing up in the rural parts of the Midwest exposes one to alot of things that culture you in a way that is a little different than if you lived in a metropolitan city your entire life.  For example, depending on the day of week, there was always some sort of sporting league that was in play such as Monday night darts, Tuesday night pool, Wednesday saw the early bird bowling league kick in while Thursday night was tied to the local poker night at the City Hall.  Friday's were all about the high school sports as the entire town gathered at the  field or gym for the local rivalry in football or volleyball.  During the winter season, basketball was the main atrraction for the fans.  Some adults were active participants in the local club curling team where they would ... » read more
Friday Feb 21, 2020   
FERC got a scoop on March Madness, with its “MOPR Madness”—a four-pack of orders issued yesterday (2/20/2020) that collectively increase the scope of resources subject to minimum offer price floors, or MOPRs. NY’s capacity market is run two times a year, once for each of the upcoming summer and winter capability periods.  In each period, capacity is secured and paid a clearing price based on NYISO’s adopted capacity demand curve. NYISO’s capacity market has relatively short forward tenor: an auction for a summer strip is held just a few months in advance, typically in late Q1.  NYISO has effectively kept prices at healthy levels, at least for the NY City and Downstate market areas (Figure 1). Figure 1 | NYISO Summer Season Capacity Prices ... » read more
Thursday Feb 20, 2020   
The New England long term forward capacity auction (FCA) results were posted a couple of weeks ago with the current 2022-2023 period continuing what would be considered a downward trend over the past five years.  Looking at the table below, you can see this trend clearly as the 2016 2019/2020 settled in at $7.03 per KW-month while the following year slid down to $5.30.  The next couple of years were also shifting lower as 2019  ended up clearing $3.80.  Once this year rolled around, the anticipation of a lower number was in order, the question was just how low? Table 1 | ISONE Capacity Market Auction Results The last line illustrates a $2.00 per KW-month settle with less total capacity acquired (first data column).  We can also see that the FCA auction ... » read more
Wednesday Feb 19, 2020   
Over the past week or so, the Lower 48 has experienced two/three day periods of colder weather wrapped around some above normal temperatures.  For example, two weeks ago Denver was basking in 70 degree daytime highs only to be met with 36 inches of snow in the mountains and the airport getting 7 inches.  It warmed up quickly over the weekend but not enough to relieve the city of the white stuff that lies on the ground.  This past weekend saw some chillier weather with Monday night sitting around the freezing level as I was briefed by the pilot on a connecting flight from Houston to my final Portland destination.  Speaking of Houston, Texas saw its swing in temperatures along with their wind profile as the daytime highs were in the low/mid 50's and the overnight lows ... » read more
Tuesday Feb 18, 2020   
SoCal Gas has a problem and it is not the same issue they have faced since the Aliso Canyon rupture in 2015. Because of the early season efforts to conserve storage usage as per the Aliso Canyon Usage Protocols and a lack of heating load the system is now faced with an abundance of in ground supply. That poses a big problem for the system as they make the transition to spring. As demand wanes SoCal Gas will need all the flexibility it can get to manage the pipeline deliveries from the Border. Last year, SoCal Gas injected 44 BCF into the caverns. Noting they only have 23 BCF of space in the cavern complex means the system will be full by the end of Q2.  Figure 1 | SoCal Gas Storage Inventory for 2016 - 2020 The flexibility concerns are not being overlooked. SoCal Gas has been ... » read more
Friday Feb 14, 2020   
We spend a lot of time thinking about renewable energy risk here at the Energy GPS headquarters. Wholesale price risk is driven by the overall level of natural gas prices, the market clearing heat rates in the various wholesale markets, and the shape premium or discount that wind and solar enjoy (or dread) in each market. We’ve written on this topic before and concluded that PJM’s Northern Illinois Hub is the most “well behaved” renewable market in the US. By well behaved, we mean that it is highly correlated with Henry Hub natural gas prices. Stated another way, when one buys output from a renewable project or invests in a merchant renewable asset, there are a litany of things that may impact the amount of revenue received. With wind resources in the Northern ... » read more
Thursday Feb 13, 2020   
Depending on the time of year and how the supply stacks are shaping up, the Alberta and Pacific Northwest market dynamics are always interesting.  There are times when the Alberta market is caught short on supply due to increased power demand during the colder winter days along with the lack of wind blowing and unit outages such as key coal plants.  This strikes a cord in the Alberta power market auction clears to where prices can rip up to $900 to $1000 on any given hour.  Such a tightness does not drive the natural gas market as AECO is pretty well supplied. Where it does come into play is with the implied heat rates that anyone who could produce any incremental power onto the grid would. Figue 1 | AESO Market Price/Implied Heat Rate Results - Heavy Load The table in ... » read more
Wednesday Feb 12, 2020   
With Valentines Day this week and March Madness right around the corner, it is usually a good time to talk about putting an end to the winter season as spring is in reach.  If you have been following the natural gas and heating oil space, you already know that the winter season has yet to come as the accumulated monthly HDD levels have been dismal all year.  Another indication tied to the lack of winter is the snowless streets across the Southern Plains of Nebraska and parts of Kansas.  My time in Colorado last week was met with a snowstorm that ran through the mountain range to dump over 24-36 inches of snow around Vail and blanketed Denver with 5.3 inches of snow in the metro area.  The prior weekend saw the daytime highs in the Mile High City jump up over 70 degrees ... » read more
Tuesday Feb 11, 2020   
By and large this has been the winter that never showed up. Since the beginning of December the Lower 48 has only seen 13 days where the HDD count posted above normal. The lack of heating load has eliminated approximately 650 BCF of demand from the natural gas balancing. Storage inventories across the country have swelled and now stand at a 610 BCF surplus to last year. Most of this issue resides right in the EIA East and Midwest caverns. In the llatest EIA natural gas inventory report posted last Thursday, the two regions make up 313 BCF of the surplus. It is not going to get any better as the latest forecast has the HDD count continuing to drop through the end of the month.  Figure 1 | NOAA EIA East Population Weighted HDDs -  Actual and Forecast through Feb ... » read more
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