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Tuesday Jun 8, 2021   
Over the past ten years big strides have been made to move the production volume out of the Marcellus and Utica out of the region to consumption areas in the Gulf, Midwest and East Coast. New pipelines like Nexus and Rover have been completed. Compression on Tennessee gas Pipeline, Columbia, TETCO and Transco have been reversed allowing volume to move down to the Gulf Coast region. These regions receiving the gas have now become dependent on the Northeast for this supply. The pipelines each carry an enormous amount of gas, most over 2 BCF per day, which puts a large amount of risk in the hands of just a few assets. When disruptions happen it causes ripples as the receipt and delivery points both have to adjust to the large changes. Sometimes the changes in pipeline flows are forced ... » read more
Monday Jun 7, 2021   
The start of June in the Lone Star State has produced plenty of cloud cover across the Houston region as a front moved in and would not leave.  It was not an ordinary storm as the local weather experts did not see that much movement in the Gulf of Mexico, which typically would move the clouds out and bring the sunny skies usually seen as we roll out of May and into June.  As a result, the region about Houston and the southern part of the state saw Pacific Northwest type weather where plenty of precipitation was in play and the cloudiness brought greyness to the days that saw well below normal temperatures. Figure 1 | Houston's Start to June 2021 - Rainy and Overcast The indicator that this stint of weather has been quite unique is the fact that the state's wind generation has ... » read more
Friday Jun 4, 2021   
By Tim Belden I came across an interview with John Arnold earlier this week that is well worth a listen. The interview appears on the “Digital Wildcatters” platform which discusses energy, technology, and finance. The interviewers had good questions and a friendly, easy-going style. This enabled some great story telling by John Arnold. John Arnold needs no introduction for anyone in the energy trading business. Coming out of college in the mid 1990’s he really wanted to land a job in investment banking. When he couldn’t land that job, he accepted a job at Enron. Within 12 months he became an assistant trader. Within 24 months of graduating from college he was trading a Texas basis book (nat ... » read more
Thursday Jun 3, 2021   
If there was just a bit more humidity in the air and some fire ants crawling up my legs while sitting in the lawn chair watching a youth soccer match, one would think they were sitting in Texas as the temperatures were hot enough in the Pacific Northwest as June rolled around.  If you were sitting in Texas, the feel is more like a typical Portland, Oregon day where the skies are overcast and the rains persist to a point that you are scouring the deals from airlines to fly further south to Mexico or east as the Florida coast looks more attractive. Figure 1 |Houston Short-Term Weather Forecast From the looks of the Houston forecast above, the pattern is not going to be changing anytime soon as thunderstorms and heavy rains are likely from today through next week Tuesday with the days ... » read more
Wednesday Jun 2, 2021   
In a recent Newsletter we discussed how structural changes in the ERCOT power market are leading to a series of surprising real-time performance figures.  ERCOT is not the only market experiencing structural shifts with visible results.  They occur in a variety of markets across North America, often for unique reasons, and sometimes rather unexpected.  Alberta is a good example. This week, Alberta power loads could set new June records because of the coincidence of structural demand shifts being amplified by some of the hottest weather for this time of year in several years.  Typically, when I hear “heat” in Alberta, I think of nothing more than a few days were you can pair flip flops with shorts and a tee.  It certainly doesn’t conjure up images ... » read more
Tuesday Jun 1, 2021   
This was a very unusual Memorial Day Weekend. Much of the Midcon and Midwest saw average temperatures range 4-12 degrees below normal which brought very cool weather to the holiday weekend. Normally these regions are making the turn to summer weather with daytime highs in the mid 80's. This turn of events combined with the stormy Gulf weather took the country's power burn total down from 32 to only 23 BCF. But this may be the calm before the storm. In the coming days the CDD total for the country will jump from 2 to 10. The Midwest will have heat indexes in the low 90's as the humidity takes its effect.  Figure 1 | Lower 48 Cooling Degree Day Forecast and Last Year The nuclear fleet is much healthier as the month of May is when the refueling season typically comes to an end the back ... » read more
Friday May 28, 2021   
For the past two and a half months, we have been watching the fallout unfold from the disaster of Winter Storm Uri. The events of February have rendered the 12x24 hedge a thing of the past in ERCOT: wind projects with existing hedges are scrambling to unwind or restructure their positions, and new wind projects seeking contracted cashflows are left scratching their heads. The risks inherent in the 12x24 hedge have been dramatically laid bare, but what can replace it? We are at a critical juncture right now. Texas has proven out the model that wholesale markets – more specifically, standard wholesale energy hedges -- can enable new wind and solar development. There are a number of entities working on Version 2.0 of the renewable hedges. Recently, we’ve seen structures ... » read more
Thursday May 27, 2021   
Now that June is right around the corner and the summer months will soon be upon us, it is the time of year that the focus on ERCOT moves to the forefront as peak demand tends to show up in July/August and scarcity pricing is accounted for in the daily analysis.  Well that is not the case this year as 2021 delivered a storm of the century back in February where ERCOT has been front and center of almost every conversation tied to how a grid should be designed, who are the active participants now that many have been pushed to the sidelines and how will the new rules/regulations impact a market that was once known for placing a price cap at $9,000, trigger an uplift (ORDC) to make sure the signal is there for new generation and most importantly held to the motto that ... » read more
Wednesday May 26, 2021   
European and Asian summer forward strip prices have been in flux in recent days in reaction to headline news.  Prices posted steep losses last week when it was revealed the U.S. would not be enforcing sanctions on a Russian pipeline project designed to increase supplies to European markets.  But this week has seen some recovery as the market has settled down with realization that the project won't come online fast enough to stave off the market tightness resulting from severely depleted EU storage inventories.  While the price swings were some of the greatest moves posted in the EU and Asian forward curves in quite some time, the fact that the declines still weren't great enough to risk closing the economics to ship U.S. LNG abroad is yet another affirmation that U.S. LNG ... » read more
Tuesday May 25, 2021   
Coming out of winter the gas market took a decidedly bullish turn when it was apparent that the COVID demand destruction from one year ago was not going to carry over to this year. Power burns, exports to Mexico and LNG sendouts were higher and as a result the storage injections in the Gulf were disappointing. Week after week the EIA storage injection numbers posted under expectations. But this bullish tone changed dramatically once the calendar page was flipped to May. Henry Hub cash prices started moving back down to their largest discount to futures this spring. At face value this could be blamed on the return of nuclear capacity and a bout of mild weather. But there was a bigger factor involved. Pipeline flows from the Northeast down to the Gulf maximized out their ... » read more
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