Western Price Survey
December 19, 2008
'Twas the week before Christmas,
Power prices played in the snow this week as electricity values initially rose on forecasts for Northwest winter storms, but by the end of the week electricity values dropped more than $20/MWh on average at some Western hubs.
Some weather records got smashed this week across the region, with Spokane receiving nearly two feet of snow by Thursday and Las Vegas getting its heaviest snowfall in 30 years.
Around six inches fell in the Seattle and Portland areas this week, and another storm promises more snow there on Sunday.
The Mid Columbia hub saw average peak values tumble on average $21 this week to $70.58/MWh, but peak prices went for a high of $106 on Tuesday as traders looked at weather forecasts calling for Northwest snow. Off-peak trades settled at $58.71, down $7 on average, but went for as much as $71 for delivery Wednesday, when snow began to fall in the area.
California-Oregon border prices followed the same route, with daytime prices reaching a high of $105 on Tuesday but losing $20 over the course of the week to average $70.62/MWh. Nighttime power dropped $7 to average $56.44.
California power demand rose this week to a high of 34,200 MW on Wednesday, Cal-ISO reported. Demand eased on Thursday to 33,100 MW and was expected to remain around the same level through the weekend.
Over the course of the week, daytime California prices lost $11 at North of Path 15 to average $62.05/MWh on Friday, while South of Path 15 prices fell $12 to $57.56. Nighttime trades were nearly static, with some downward movement (see chart).
Palo Verde average prime trades lost $6 to $48.59 while nighttime deliveries shed $4 to $39.49/MWh.
California and Nevada weren't spared from the winter storms. Hail fell in San Francisco and snow dropped in Las Vegas and areas outside Los Angeles.. Temperatures were in the low 50s in San Francisco and low 60s in Los Ange-les.
Energy traders are fixated on the worsening economy. OPEC, which controls 40 percent of the world's crude oil supply, took a buzzsaw to its production quotas this week and cut output by 2.2 million barrels per day, but traders appeared to care less as oil fell to its lowest level in over four years. On Friday, NYMEX crude closed at $36.22 a barrel.
OPEC doesn't appear strong enough to stop the decline in energy prices, particularly since its previous cut of 1.5 million barrels per day in October didn't do much to stave off further declines. J.P. Morgan Chase on Thursday trimmed its crude price forecast from $69 to $43 a barrel next year.
Natural gas often trades in synch with crude and this week was no different. Cold weather in the Northeast, Northwest and Midwest barely caused a ripple in the benchmark natural gas price on NYMEX, with prices closing down about 30 cents this week to $5.33/MMBtu.
And natural gas prices fell despite the coldest temperatures this winter provoking a storage drawdown of 124 Bcf of natural gas last week -- the biggest drop this heating season, the U.S. Energy Information Administration said.
Natural gas prices still remain low thanks to the economic slowdown, drawdown in demand and booming stateside production. Despite shuttered drilling in the Gulf of Mexico following Hurricanes Ike and Gustav, the country produced 7.2 percent more natural gas in the first nine months of the year over 2007.
The recession has hammered natural gas prices so much they probably will end the year lower than where they began the year, the EIA said. The average Henry Hub benchmark contract is currently 26 percent, or $2.08, lower than last January at $5.79/MMBtu.
Out West, natural gas supplies bumped down by 11 Bcf to 454 Bcf, but storage remains healthy at 3.9 percent above last year's levels and 13.2 percent above the five-year average [Kristina Shevory].
Archives of the Western Price Survey for the past year are also available online.
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