Energy Market Update 09072022
Music Artist: Wu Tang Clan
Song Title: Triumph
NYMEX NG:~7.853/mmbtu down ~$1 from last weeks update
WTI:~$83.23/bbl down ~$6.00 from last weeks update
PJM RT LMP: ~$77.11/mWh energy
ERCOT RT LMP: ~$70.51/mWh
Long Island Zone K: ~$96.09/mWh
We are off to a warm September in most of the US. California and the west coast is feeling it big time with EEA3 called last night and forced outages happening in the ISO from the utilities. Still seeing 80’s on the east coast with above average temps coming through the 20th of Sept. Precepitation is also mirroring above normal in the same regions as the above normal temps. As we are technically in hurricane season, there arent any that are of significance. Earl and Danielle are now named with Earl the closest to Flordia and Danielle is much further north. Currently Earl is moving north at approximately 6 mph. With no major hurricanes on the way and warmer temps, we could be in store for a mild winter here in the US. NOAA’s seasonal outlook is approaching somewhat of a mild winter in the East and in the South. NOAA did predict with decent accuracy of what happened this summer, lets see if they can go 2/2 with their predictions. Also check out the national weather service link in the charts, just some funky colors all over the west with historic heat in Cali and the west coast in general. Remember folks, all weather models are predictions and thats all they will ever be.
And were off, EEA3 called in CAISO which is the highest level of ‘energy emergency’ that can be called. Forced outages happened and offtakers were sent text messages to curtail there demand for electricity. Interesting how the only ISO’s that have called an energy emergency were ones with heavy renewable generation. We had ERCOT a little over 1 year ago with winter storm URE and also this summer, along now with an EEA3 (highest level of emergency) in the CAISO. Now lets look at accross the pond where you have the new prime minister of the UK talking about putting in price caps AND also managing peak demand. Folks this is a politican saying this, not a grid operator or anyone with a half of energy brain. A world full of renewables, is this the path were we have to manage how we use the electrons? Im all about efficency however residental users are different than industrial. Let the residental customers play ball in these DR/LR markets, oh wait… all for me and none for thee, I suppose. LNG is becoming a hot topic as its been over the past couple of years. You have Mexico saying that they will be building out capacity as there certainly is a market for it. Meanwhile you have Europe saying that LNG expansion project will take around 5 years to develop and a price of 200mm of spot LNG cargo are extremely. Ultimately the global demand for LNG is there and certainly will drive domestic NG prices up however this takes time as i have been saying and it seems that others agree also. Near term will be extremely hard since the whole energy per unit time thing i harp about. If there isnt somewhat of a relief of a mild winter in the EU, who knows what will happen. Finally the EPA trying to put a stop to Cheniere’s move to waiver the gas fire turbine pollution rule. Its almost like these agencies are just trying to stop the engineers of allowing reliable fuel to hit the market. While its not helping price much, it will at least help people from freezing in winter if the LNG can be shipped out.
I talk a lot about NG simply because of how coorelated the pricing is to the pricing of electricity. Demand for NG is high in most ISO’s as you all know and understand. I want yall to see something however. Here are some ISO’s and zones within those ISO’s ATC block pricing for just Aug-21 in comparrison to Aug-22 (a YoY comparrison). See the Increases:
Ameren (MISO): +54%
hese are just to name a few and this is just one month in the day ahead curve. If you saw the 12 mth strip it would be MUCH higher when including winter and summer pricing. There are increases all over the place for every single ISO out there. And those numbers I showed are just for the energy, there are about 6-12 different cost coefficents that are needed to understand the full price of electricity on grid dont forget. We have now again REP’s moving pass throughs at higher cost especially RMR (realibity must run) and thats happening in most markets. There is still some backwrdation in the forwards and imo thats some value that one would want to capture for a least part of their shaped load profile. The last thing we need is to have the metrics go the opposite direction like were seeing currently.
Currently NG is falling from its most previous high just touching the $10/mmbtu number at the NYMEX. Now trading $7.92/mmbtu on the prompt mth. A 9mth high on production up over 96BCF/day. Been hearing that still private money is entering in to do more exporation and production however there seems to be a lot of mergers and acquisitions happening as money isnt cheap and folks are focusing on postive cash flow/liquidity. There could be a time to enter here as within two weeks NG is down ~$2/mmbtu. Demand for NG is still up ~4BCF YTD even with power burn softening in most parts of the country. Rig counts are at levels pre covid and we can tell since production is ramping. Lets see if that continues. Freeport does in fact seem (haha) that it will come back online as recently expected here in November. Again for the folks in the know, let it be. Storage is expected to be slighly weaker that LY injection at ~50 BCF. Currently still 7.9% down from LY and 11.3% down from the 5 year average.
Every single day things are happening and moving so fast i reckon its extremely hard to keep up. But I will continue to keep the pace as much as i am physically able. Maybe the politicians should look towards that strategy since they seem to spew words out and things magically appear. We all want a magical bag of life and inside all the tools to fix all problems exist. Problem is its not real and we all need to come to grips. Fix whats broken and stop making folks pay for it when all the along that money printer is brrrrrrrrring like an aged cat ready to tip over. PEACE
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