Weekly Energy Market Updates by Region

Issue week: January 27th, 2022  (Wk 4)

 

POWER MARKETS

 

WEST  In the cash market, imports on the Palo Verde line continue to ramp up, although they are not at full capacity because of the nuclear outage. Rough weather in the Pacific Northwest has not yet affected transmission into CAISO. Solar generation remains strong, but wind output has been weaker than expected. Fortunately, the lackluster windmill activity should not be a problem, for the relatively uneventful weather has kept demand in check. Overall, the cash market is functioning without any hiccups.

ERCOT  Although prices approached $100/MWh earlier in the month because of forecasts of cold weather, 7x24 real-time prices have averaged only $32/MWh this week despite the frigid conditions. In the term market, the focus is now on February as low temperatures and freezing precipitation are now projected toward the end of next week. Accordingly, 7x24 prices for February are up by approximately $20/MWh since last week from $45/MWh to $66/MWh. Ongoing cold-weather forecasts across most of the nation plus sizable natural gas withdrawals have increased term prices further down the curve as well. BY22, CY23, and CY24 have risen by approximately $5/MWh, $1.50/MWh, and $1.00/MWh, respectively, since last week.

EAST As they did last week, LMPs remain elevated in both ISO-NE and NYISO, where both Day Ahead and Real Time have averaged around $160/MWh this week. These prices are roughly $100/MWh higher than last January’s prices in both markets. Meanwhile, prices in PJM and MISO are a bit higher than last week but still well below $100/MWh.

NATURAL GAS 

The EIA reported Thursday morning that, for the week ending January 21, U.S. inventories decreased by 219 Bcf, a mere 4 Bcf more than the anticipated drain of 215 Bcf. Total stockpiles now stand at 2,591 Bcf, down by 10.6% from a year ago and 1.0% below the five-year average for the same week.

The NYMEX Henry Hub prompt month of February expired in dramatic fashion today, settling at $6.265/MMBtu, nearly 50% more than yesterday’s sign-off and 97% more than the price that February 2022 fetched three years ago. Earlier in the day, prices for the prompt month had started to rise by $0.20/MMBtu or so on projections of colder weather in the first two weeks of February, which, along with today’s expiration of that contract, apparently triggered some kind of massive short squeeze in the final hour of trading. The exact cause of the spike remains under investigation. In any event, more consequential in the long term is the resumption of price upturns further out the Henry Hub curve, where Bal-22 and Cal-23 today reached new highs for the past seven-plus years and the past sixplus years, respectively.