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Thursday Jan 21, 2016   
The main headline this winter has been dominated by the bearish natural gas markets as weak demand coupled with stout supply has kept prices low.  More recently, the focus has shifted to the drastic decline in oil prices. Both the decline in NG and oil are bearish indicators for the power markets as weak NG price keep price down and cheap oil provides an inexpensive substitute if NG prices do spike. This week NEISO provided a perfect example of the bearish impact these two factors are having on power prices YoY.  The high temperature for Boston ... » read more
Wednesday Jan 20, 2016   
We are now half way through the withdrawal season. Storage inventory is higher than ever. The year-on-year surplus is at 587 bcf (See Figure 1 for a comparison). With such high inventory level, we wonder if certain clauses in the storage contract may force some shippers to withdraw gas. If so, how would it affect the cash prices? Figure 1 | Storage Inventory Year-on-Year Comparison Last week we talked about how ANR applies a .85% cycling reduction on any balance in excess of 20% of one’s maximum storage quantity. Many other pipelines have similar sections in ... » read more
Tuesday Jan 19, 2016   
Bye Buy Brent-WTI Spread Last week one of the most persistent energy price relationships in the global energy markets flip-flopped. For the last five years Brent crude oil has traded at a premium to West Texas Intermediate (WTI) as evidenced by the figure below which shows the Brent WTI spread (Brent less WTI). Earlier this week WTI traded $1.28 per barrel above Brent. Figure 1 | Brent-WTI Spread for Last Five Years (dollars per barrel) So what has caused the Brent WTI spread to collapse and, at least temporarily, reverse? While some analysts suggest the lifting of ... » read more
Friday Jan 15, 2016   
A necessary element in understanding power and gas prices is an understanding of the relationship between coal and natural gas power burns. The equation becomes complicated during winter months as fluctuating natural gas prices can push gas fired generation out of the money, displaced by relatively cheaper coal generation. If we look at the EnergyGPS Coal Burns report we can see the grid changing as we move through winter.  Figure 1| Regional Coal Burns BCF Equivalent - Daily  By converting the total MW coal burns into a BCF equivalent we are able ... » read more
Thursday Jan 14, 2016   
As oil is currently sitting around  $30 a barrel for the first time in 12 years, the decline is particularly relevant to the Northeastern power markets as we typically see oil generation begin to replace natural gas this time of year.  During the winter months it is not uncommon for traditionally gas burning generators to switch to oil as cold temperatures drive up the price of natural gas. Considering the overall bearish conditions in the gas market thus far this winter, it seamed that any oil generation, especially gas to oil switching, would not ... » read more
Wednesday Jan 13, 2016   
As we work our way through the 2016 Winter, there are a three things that are keeping the natural gas market from making a big rebound.  The first item on the list is the weather.  In December, we saw spring-like conditions in the Eastern portion of the country (Philadelphia was topping the 80 degree mark on certain days).  The Midwest was not too far behind with highs in the upper 60’s/low 70’s while Texas was seeing massive wind days netting back the overall power loads.  As a result, the overall res/com demand numbers were coming in ... » read more
Tuesday Jan 12, 2016   
Coming into this winter there was a lot of speculation about the El Nino weather pattern and its possible effects on the on going drought in California.  The primary expectation was the El Nino weather pattern would drive increased precipitation possibly ending the two year drought for the golden state.  Thus far the precipitation in California is up significantly YoY and we are seeing the results in the hydro power production. Figure 1| California Hydro Generation HL YoY - MW/h  Total hydro production is up around 300 MWs from last year and ... » read more
Monday Jan 11, 2016   
There are some parallels to the Green Bay Packers offense and the SP15 implied heat rate, the common thread to each other is they are both hard to figure out these days.  If you are an avid Packer fan (like me) it will all make sense.  Over the last two weeks of the regular season, the Packers led the league in QB sacks (13 to be exact), they only converted on 18% of their 3rd down conversions and lost two fumbles that resulted into defensive touchdowns.  The good news for Packer fans is they still made the playoffs, which as a fan we know it starts a ... » read more
Friday Jan 8, 2016   
After having the wettest December on record in the Pacific Northwest, the New Year has provided us nothing but dry, cold conditions.  As a result, the overall MAF for the Jan-Jul time period has shifted down from 101 at The Dalles to the most recent report showing 89.8 MAF for the same time period. Figure 1 | NWRFC ESP MAF Table and Chart The reason for the big shift down over the past couple of weeks is due to the December precipitation coming in the form of rainfall, which increased the Westside run of river flows but had little impact on the overall lower ... » read more
Thursday Jan 7, 2016   
Last month we published a newsletter reviewing JP Morgan’s paper titled “A Brave New World – Deep De-Carbonization of Electricity Grids.” The production of the paper was overseen by Vaclav Smil, Distinguished Professor Emeritus in the Faculty of Environment at the University of Manitoba. Over the holiday break I spent some time reading more work by Professor Smil. Of particular interest to me is his book Natural Gas – Fuel for the 21st Century. The book is a comprehensive review of all facets of natural gas extraction, distribution, and ... » read more
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