Western Price Survey
Week's End Edition
Punxsutawney Phil, the weather-forecasting groundhog, saw his shadow Tuesday, meaning another six weeks of winter is in store. As if on cue, rain swept into California a few days later, a massive snowstorm was set to slam the East Coast on Friday, and energy prices rose.
As the Mid-Atlantic prepared to dig itself out of 2 feet of snow in some parts, spot natural gas prices at some New York hubs gained more than $4/MMBtu just on Friday -- the Transco Z6 New York hub, for instance, traded at a high of $14/MMBtu, roughly three times higher than the price at the Alberta, Canada hub.
Because Western storms were less severe -- a little bit of rain on the California coast, some snow in the mountains -- natural gas prices did not move as much in comparison with the East. Western spot prices gained about 20 cents/MMBtu for the week, with Southern California Border gas trading for an average of $5.65/MMbtu Friday and PG&E CityGate at $5.81.
Looking at the overall picture, however, Henry Hub spot prices for natural gas continue to trade above year-ago levels. On Wednesday, spot Henry Hub gas went for $5.51/MMBtu, about 47 cents above year-ago levels, and gained another 9 cents in Friday-morning trading.
Meanwhile, the contract for March natural gas gained 19.5 cents/MMBtu from Jan. 27 to Feb. 3, which was the largest gain on the 12-month (March 2010 through February 2011) futures strip, the U.S. Energy Information Administration reported. The March 2010 contract has traded at a discount to the Henry Hub spot price, "suggesting that producers have an incentive to withdraw natural gas from storage to meet current demand," the EIA said.
This weekend's storms could push storage levels below the one- and five-year averages. Working natural gas in storage at the end of last week was 2.406 Tcf, representing a decline of 115 Bcf overall, the EIA reported. Storage is just 199 Bcf higher than last year and 150 Bcf above the five-year average. In other words, we're starting to cut it close.
In Western electricity markets, peak values rose about $2-3/MWh for the week at North of Path 15 and South of Path 15 to around $50/MWh Friday for daytime electricity. Nighttime prices gained about $4-5 at both hubs, and traded at an average of $42/MWh Friday.
Electricity prices in the Northwest also gained a few dollars since Monday, with daytime power finishing the week close to $50/MWh and off-peak around $43 at both the California-Oregon Border and Mid-Columbia (see chart).
The Palo Verde hub, which has a desert climate, had the highest peak prices this week ($53/MWh) and the lowest nighttime prices ($32.50).
What's ahead: Expect a large natural gas storage withdrawal over the next two weeks -- heating demand will undoubtedly be high as parts of the East Coast cope with a blizzard. Western gas and electricity markets aren't likely to move as much in response, however, as weather in the West next week should remain tame by comparison -- some intermittent rain on the California coast, and clear skies and sunshine in Seattle.
Spring outlook: So far, predictions from weather-forecasting firms made earlier in the year for a dry Northwest and wet California winter have held true, the result of an El Niño pattern at play (see CEM No. 1055 ). On Jan. 29, the California Department of Water Resources released its second snow survey, which showed that water content in California's mountain snowpack is 115 percent of normal at this time, compared to 61 percent of normal last year. The survey prompted cautious optimism that this year might mark the end of a three-year-long drought for the state, though DWR says it still has to play a lot of catch-up with water supplies. In the Northwest, snowpack in Washington state is below average this year.
We'll know more when Mojave Max -- a desert tortoise that is California's version of Punxsutawney Phil -- emerges from her burrow. Like all desert tortoises, Max goes to sleep for five or six months in the fall and emerges sometime in the spring. Max, who lives in Palm Desert at the Living Desert Zoo and Botanical Gardens, emerged last year on Feb. 24. Mark your calendars [Chris Raphael].
* Prices represent both day-ahead locational marginal prices (financial swaps, or EZ Gen DA LMPs) and quasi-swap prices (EZ Gen) as reported by ICE.
Archives of the Western Price Survey for the past year are also available online.
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