Western Price Survey
February 28, 2014
Energy prices in the West this winter have been heavily influenced by a polar-vortex pattern that has sent most of the cold weather and precipitation east. The pattern has been spiking natural gas and power prices in the West as interstate gas pipelines have served Eastern markets and California has turned to more-expensive natural gas power instead of hydro.
The pattern includes a persistent atmospheric ridge in the Northeast Pacific that has been blocking West-ern precipitation. Near the end of the week, however, a classic winter storm broke through the ridge, bringing rain to California, snow to Tahoe, and lower energy prices to the region. It remains to be seen, however, if the ridge pattern will break for the remainder of the winter and how much the storms will influence snowpack.
The California Department of Water Resources reported Feb. 28 that statewide water content was 26 percent of normal to date, but it was still snowing in Tahoe at the time of the survey. "We welcome the late storms, but they are not enough to end the drought," said DWR Director Mark Cowin.
Henry Hub natural gas fell $1.38 since last Thurs-day to trade Feb. 27 at $4.56/MMBtu. Western hubs also generally ended lower, led by Permian, which fell $1.16 to $4.68 (see table). Stanfield and Sumas, by contrast, gained a few cents in the trading period.
Average peak-power prices tended to follow gas lower, and finished between $55 and $60/MWh on aver-age at most Western hubs. With rain finally arriving in California at the end of the week, NP15 and SP15 peak prices fell $12/MWh compared with the previous week, while Northwest hubs at Mid-C and COB dropped about $8/MWh (see chart).
Working gas in storage reached 1,348 Bcf as of Friday, Feb. 21, according to U.S. Energy Information Administration estimates, a net decrease of 95 Bcf from the previous week. Storage levels are now 40.2 percent less than a year ago and 34.5 percent less than the five-year average. The Western region saw a 12 Bcf withdrawal during the agency's report period.
"Given the current weather forecast for the first half of March," noted Barclays analysts, "storage is likely trending towards a 800-900 Bcf finish at the end of March. Our balances suggest that if prices average between $4.25 [and] $4.75/MMBtu during the sum-mer, storage could still rebuild back to relatively com-fortable levels by the end of the injection season."
What's ahead: The National Weather Service said above-normal temperatures are likely from Oregon into Southern California and Arizona March 5-13. Washing-ton and Oregon could see above-normal precipitation March 5-9. There has been some speculation among forecasters that an El Niño pattern is forming in the Pacific, which would bring California a wet winter next year [Linda Dailey Paulson].
Archives of the Western Price Survey for the past year are also available online.
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