Western Price Survey
Week's End Edition
Spot prices for peak power in the Northwest steadily gained about $10/MWh since Monday, finishing the week near a high of $50/MWh at the California-Oregon border and the Mid-Columbia hubs.
Price increases at California hubs were less severe, with both North of Path 15 and South of Path 15 power gaining a few dollars over the week to finish near $40/MWh. The 1,070 MW second unit at the San Onofre Nuclear Generating Station was expected to return to service soon after undergoing maintenance following a steam-generator replacement.
The Northwest has been coping with a dry year, the result of an El Niño pattern that dumps precipitation farther south. California's Department of Water Resources on April 1 released its fourth snow survey showing that state snowpack water content is 106 percent of normal to date, versus 81 percent of normal at the same time last year. The Northwest, meanwhile, may not have hydropower to sell to California this summer if streamflows at The Dalles Dam, now barely above critical levels, fall much further.
Spot gas prices hit highs early in the week, as traders expected the U.S. Energy Information Administration to decrease its estimates for natural gas production this year. But on Tuesday, the EIA's Short-Term Energy Outlook stated that total marketed natural gas production would rise 0.7 percent this year to 60.87 Bcf. The figure was actually 2 Bcf higher than the March energy outlook. So much for expectations.
In response, spot natural gas prices fell and by the end of the week, values at most Western hubs had slipped below the $4/MMBtu mark after trading well above that earlier in the week (see chart).
In its weekly gas update released Wednesday, the EIA said possible factors contributing to the previous rise in gas prices included higher crude-oil prices, a rally in natural gas futures prices, and "a shift in market expectations regarding future natural gas prices." The EIA is still expected to make "significant downward revisions" to its monthly gas production data on April 30, according to Enerfax, but tame weather and plentiful gas storage could offset a strong upward movement in natural gas prices.
According to the EIA, more than 31 Bcf of natural gas went into storage for the week ending April 2, moving total inventories to 1.669 Tcf. The West gained 3 Bcf, putting inventories 3 percent above last year and 28.6 percent above the five-year average.
What's ahead: According to the EIA outlook, the Henry Hub natural gas spot price is expected to average $4.44/MMBtu this year, much less than the $5.17 projected for 2010 in last month's outlook. The agency noted that natural gas spot prices at the Henry Hub were trading above year-ago levels -- at $4.08/MMBtu on Wednesday, prices at the Henry Hub were 17 percent above year-ago levels. By Friday, however, Henry Hub spot prices had fallen to $3.92/MMBtu.
In its April NG Market Notes newsletter, Navigant Consulting raised the "reasonable possibility" that a glut of shale gas and LNG will send strong signals to large industrial fuel and electric consumers to use natural gas. The global LNG surplus could come in at 4 Bcf by 2015, meaning the most expensive LNG and shale-gas sources will have to be stored for later delivery, Navigant stated [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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