January makes a turn for the cold; How will energy markets react?

Over the last week, weather forecasts for the last third of January have taken a sharp turn in the colder direction, sparking price increases across the board.


General Update

  • Financial gas markets trended slightly higher, with the February 2019 NYMEX contract price increasing approximately $0.03/MMBtu (0.9%) to finish the week at $2.984/MMBtu. The 12-month strip price averaging February 2019 through January 2020 futures contracts grew 0.10/MMBtu (0.4%) to $2.844/MMBtu.

  • Physical gas spot prices also trended higher this past week, with the exception of California. Boston’s Algonquin Citygate rose approximately $3.63 (122%) to $6.60/MMBtu. Transco Zone 6 NYC increased $2.53 (93%) to $5.25/MMBtu.

  • Pennsylvania’s Dominion South decreased approximately $0.14 (-5.6%) to $2.65/MMBtu. Tennessee Zone 4 Marcellus spot prices increased $0.19 (7.5%) to $2.71/MMBtu.

  • SoCal Citygate prices fell $2.99 (-39%), to $4.66/MMBtu. Prices at Northern California PG&E Citygate also decreased $0.40 (-10.5%) to $3.42/MMBtu.

Power

  • Power curves have experienced steep increases as forecasts reveal colder than normal temperatures for the end of January. For the NEMASSBOST zone in ISONE, the 12 Month ATC strip increased $3.96 (9%) to $48.11. The 24 Month ATC strip rose $2.32 (5%) to $47.25, and the Cal 2020 ATC strip gained $0.98 (1.5%) to finish at $46.39/MWh today.

  • For the NYC zone in NYISO, the 12 Month ATC strip increased $3.91 (9.6%) to $44.40. The 24 Month ATC strip rose $2.56 (6.3%) to $43.25 and the Cal 2020 ATC strip gained $1.22 (3%) to finish at $42.11/MWh today.

  • For the PEPCO zone in PJM, the 12 Month ATC strip increased $2.93 (7.5%) to $42.04. The 24 Month ATC strip rose $1.86 (4.8%) to $40.65 and the Cal 2020 ATC strip gained $0.80 (2%) to finish at $39.27/MWh today.

  • For the Houston zone in ERCOT, the 12 Month ATC strip dropped $2.05 (4.6%) to $46.24. The 24 Month ATC strip rose $1.35 (3.2%) to $43.21, and the Cal 2020 ATC strip gained $0.65 (1.6%) to finish at $40.19/MWh today.

Utility Highlight

  • A review of all competitive residential markets indicates negative to minimal headroom in all areas. We will continue to monitor and highlight markets that move positive in this section. Please contact TrueLight should you need more detailed information about current default rates and headroom, or would like to receive our forecast for future default rates and headroom by market.

Natural Gas

  • For the week ending January 4, the EIA reported net withdrawals from storage of 91 Bcf, which is higher than last year’s net withdrawals of 337 Bcf for this week and lower than the 2014-2018 average net withdrawals of 187 Bcf.

  • Working natural gas in storage totaled 2,614 Bcf, which is 204 Bcf (-7.2%) lower than last year’s level and 464 Bcf (-15.1%) lower than the five year average of 3,078 Bcf.

Supply & Demand

  • The EIA reported that the average total supply of natural gas increased by 1% week/week. Dry natural gas production remained constant while imports from Canada increased 18%.

  • Total US consumption of natural gas fell by 3% week/week, while consumption for power generation fell 1%. Residential-commercial consumption experienced a 4% drop. Industrial sector consumption dropped 2%, and exports to Mexico increased 19%.

  • LNG exports declined week/week as ten vessels (7 from the Sabine Pass liquefaction terminal, 2 from Cove Point, and 1 from Corpus Christi) were loaded and departed US ports, totaling 36.2 Bcf.

Market Intelligence

  • With the Government shutdown into its fourth week, some impacts have translated into the energy market. Beginning with weather - there are some concerns that the American weather model was getting stale inputs, which may have contributed to a decline in model performance earlier this month. While the model's performance has rebounded amid the colder turn in January, there are still questions as to whether the model is receiving the freshest inputs possible. While the NOAA does produce its short term/long term weather outlooks and other essential forecasts, "non-essential" datasets are no longer being supplied, including daily forecasts from the NCDC: https://governmentshutdown.noaa.gov/.

  • NRG filed a Notification of Change of Generation Resource Designation (NCGRD) with ERCOT on December 28, 2018 declaring the NRG Texas Power LLC – SRB_SRB_G1 and NRG Texas Power LLC – SRB_SRB_G2 generation resources, which are currently mothballed, will be permanently retired as of January 23, 2019.

  • CenterPoint Energy Houston Electric has filed at the PUC Texas to reduce charges to retail electric providers by lowering the Rider NDC (Nuclear Decommissioning Charges), which will become effective February 15, 2019. The residential rate class NDC charge is set to decrease 70% to $0.000003/kWh and the Secondary ≤10 kVa rate class NDC charge is to also decrease about 71% from $0.000007/kWh to $0.000002/kWh.

  • A recent South Carolina bill has proposed that large customers with new or existing contract demand of ≥ 1MW at a single metered location be eligible for a competitive supply program. This program would allow eligible customers to opt for their utility to enter into a power purchase agreement (PPA) for renewable energy from a competitive supplier on their behalf. This bill allows participating customers to annually procure an amount of energy equivalent to 125% of their most recent annual energy usage.

Weather

  • Over the last week, weather forecasts for the last third of January have taken a sharp turn in the colder direction. While both the American and European models are in agreement for a significant cold event, there is some disagreement as to the depth of the Arctic intrusion, with the American calling for deeper cold as a product of the stronger Alaskan ridge. The cold burst should begin in earnest this weekend and likely carry into February.

  • Above normal precipitation risk accompanies the widespread cold risk in the 8-14 day window along the East Coast, the Midwest and the northern Rockies. Neutral precipitation risk is in store for most of Texas and southern reaches of the Great Plains, while the West Coast is expected to experience relatively dry conditions.

© 2019 by TRUELight Energy LLC

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