The Weekly eMarket Update will not publish the week of November 22nd due to the Thanksgiving holiday. However, we will return the week of November 29th. We hope that everyone has a very happy and safe holiday!

Weekly Energy Industry Summary

Commodity Fundamentals

Week of November 15th, 2021

By The Numbers:

  • NG '21 prompt-month opened at $4.90/MMbtu on Monday, November 15, up $0.11/MMbtu from last Friday's settlement. 
  • WTI '21 prompt-month futures opened on Monday, November 15, at $80.66/bbl, down $.13/bbl from Friday's settlement.
  • Coal spot contracts (Central Appalachia) are trading at $89.75/ton, EIA reported on 11/12/2021, up $10.70 per ton from the previous week.

Natural Gas Fundamentals - Bullish

  • Prompt-month NYMEX natural gas opened trading on Monday November 15th, at $4.90/MMBtu, up $0.11/MMbtu from last week's settlement of $4.79/MMBtu.
  • U.S. natural gas futures edged-up initially, on Monday, trading at $4.97/MMbtu, up $.18/MMbtu in mid-afternoon trading.
  • A very warm October and a warmer-than normal first half of November has loosened the near-term supply/demand balance over the past few weeks.

Crude Oil - Bullish

 

  • Prompt-month crude oil prices opened on Monday, November 15th, at $80.66/bbl, down $0.13/bbl from the previous settlement last Friday. 
  • Prompt-month crude oil traded at $80.86/bbl, mostly flat in late afternoon trading on Monday.
  • Renewed COVID concerns in the EU are posing some near-term demand concerns for crude oil.

Economy - Bullish/Neutral

  • Companies are paying higher wages, spending more for materials and absorbing record freight costs, pushing up economic inflation gauges.  They are also reporting some of their best profitability in years, The Wall Street Journal reported.
  • Manufacturers struggling with a chip shortage are finding workarounds, executives said, redesigning products, shipping uncompleted units and focusing on older, lower-tech models, The Wall Street Journal reported.
  • House Democrats will return this week with the goal of passing a roughly $2 trillion social spending and climate package that has revealed divisions within the party, The Wall Street Journal reported.

Weather - Neutral

  • A modest cold shot hits the Midwest through Tuesday of this week, follwed by a warm up toward the end of the week and then another cold shot through the weekend.
  • The Midwest pattern is much the same in the Northeast.
  • The West is stormy. 

Weekly Natural Gas Report:

 
  • The Energy Information Administration (EIA) reported an injection of 7 Bcf into underground storage for the week ending November 5, 2021.  Inventories are 3,618 Bcf, which is 308 Bcf or -8.0% less than the same period last year and 119 Bcf or -2.8% less than the 5-year average.  For the week ending November 12, Baker Hughes reported 102 gas-directed rigs, up 2 rigs from the prior week.  Oil-directed rigs were at 450 for the week ended November 5, up 6 oil-directed rigs from the previous week.
Prices reflect week ending Nov 12, 2021
Prices reflect week ending Nov. 12 2021

Weekly Power Report:

Power - Bullish

  • Power prices for Calendar 2022 fell 5-6% in PJM and the MISO last week in concert with a softening natural gas market.  Similar declines in the northeast were seen as well. Power prices continue to be most influenced by the price of natural gas across all ISOs. 

Mid-Atlantic Electric Summary

  • The Mid-Atlantic Region’s forward power prices have moved downward over the past week with natural gas prices, which are now -21% lower than the October high of $6.20/MMBtu for the NYMEX prompt-month contract.   The downward pressure continues to be attributed to the slow start to winter and the diminishing fears of a natural gas shortage this winter.  Monday saw natural gas prices higher in the morning, but the overall trend heading into November has been down.  The forward power price strips through 2026 decreased by -2% overall this past week with the 2022 term moving -6% lower and the 2025 strip trending lower by -2%.  Forward prices for the entire strip are currently trading approximately -2% below the all-time high prices for those years with the 2022 term -6% lower than the highs and the back end of the curve term for 2026 trading -2% below the highs set last month.  Index prices continue their year-over-year march upward with most regions greater than +200% higher than the previous year, currently.  The day-ahead index power prices in West Hub thus far in November have averaged $66.21/MWh or +14% higher than the October average and +220% higher than the November average of last year, while the month-to-date average settlement price for the Eastern Hub is currently $70.67/MWh, which is +13% higher than the last month’s average and +220% higher than the November 2020 average.
  • House Committee Votes on RGGI Disapproval Resolution - On 11/8, the House Environmental Resources and Energy Committee approved a resolution to reject the RGGI rulemaking.  The vote fell nearly down party lines with one Democratic member voting in the affirmative with all Republicans.  The resolution now moves to the House floor where it is expected to pass, but without a veto-proof majority.  Despite the legislature’s efforts to derail RGGI, Governor Wolf has stated on numerous occasions that he will veto the resolution

Great Lakes Electric Summary

  • The Great Lakes Region’s forward power prices have moved downward over the past week with natural gas prices, which are now -21% lower than the October high of $6.20/MMBtu for the NYMEX prompt-month contract.   The downward pressure continues to be attributed to the slow start to winter and the diminishing fears of a natural gas shortage this coming winter.  Monday saw natural gas prices higher in the morning, but the overall trend heading into November has been down.  The forward power price strips through 2026 decreased by   -2% overall this past week with the 2022 term moving -5% lower, while the 2025 strip remained unchanged in most zones.  Forward prices for the entire strip are currently trading approximately -2% below the all-time high prices for those years with the 2022 term -5% lower than the highs and the back end of the curve term for 2026 trading -2% below the highs set last month.  Index prices continue their year-over-year march upward with most regions currently slightly lower than +200% higher than the previous year.   The day-ahead index power prices in COMED thus far in November have averaged $50.16/MWh or -5% lower than the October average but +182% higher than the November average of last year, while the month-to-date average settlement price for AdHub currently is $63.30/MWh, which is +9% higher than the last month average and +206% higher than November 2020 average.  In Michigan, the day-ahead index power prices thus far in November have averaged $56.28/MWh or -2% lower than the October average and +143% higher than the November average of last year, while the month-to-date average settlement price in Ameren is currently $58.22/MWh, or +2% higher than last month’s average and +188% higher than the November 2020 average.
  • FERC Commissioner Danly Issues His Statement on PJM’s Focused MOPR - PJM’s reformed MOPR went into effect by operation of law on 9/29 as a result of a 2-to-2 deadlock among the FERC commissioners.  Chairman Glick and Commissioner Clements issued a joint statement on 10/19 explaining that they support PJM’s MOPR and, on the same day, Commissioner Christie issued his statement explaining that he would reject it.  On 10/27, Commissioner Danly issued his statement explaining that he would have rejected PJM’s focused MOPR.  Specifically, Danly argues that market prices can only be just and reasonable if neither the seller nor the buyer have market power; thus, in his view, FERC must mitigate buyers including states to ensure market results are just and reasonable.  Danly argues that this mitigation should prevent any state mechanism that could suppress prices (regardless of whether the state intends to effect price outcomes) and that mitigating state subsidies is not a FERC intrusion into state authority over resource mix decisions.  Finally, Danly also raises several procedural concerns with implementing a significant policy change – shifting from the expanded MOPR to the focused MOPR – without a clear explanation from a majority of commissioners justifying the change in policy and meaningfully addressing protests.  He argues that the effectiveness of the new, focused MOPR is not the result of reasoned decision-making and fails to satisfy the due process requirements under the Administrative Procedures Act.  Danly suggests that if the matter is appealed (as expected), the Court should remand the matter and vacate PJM’s focused MOPR.

Northeast Energy Summary

  • On November 3 at the NEPOOL Participant’s Committee meeting the ISO-NE provided an update on Winter 2021-22 readiness, including results from a high-level operational fuel supply scenario analysis. Given global LNG prices, ISO-NE acknowledged the low probability of New England seeing liquified natural gas LNG import cargoes this winter (beyond already contracted amounts for the Mystic Generating Station in Everett).  Despite an outlook for warmer-than-normal temperatures, ISO-NE is concerned that an extended cold snap could require emergency procedures.  ISO-NE performed a high-level operational fuel supply analysis under three historical winter weather scenarios: Winter 2020-21 (a mild winter with brief cold snaps); Winter 2017-18 (overall mild but with a two-week extended cold snap); and Winter 2013-14 (a ‘polar vortex’ winter with several severe cold stretches). Assuming no significant generation or transmission outages and limited oil replenishments, the Winter 2017-18 scenario (with an extended cold snap) showed the potential need for some emergency operational procedures. With adequate oil replenishments, the scenario did not show a need for emergency procedures. The Winter 2013-14 polar vortex scenario showed a need for all emergency energy procedures.  ISO-NE underscored that Winter 2013-14 conditions with only 27 Bcf of LNG and current oil inventories “will not be a good winter.” Finally, the Winter 2020-2021 scenario showed the grid could be operated reliably without the need for any emergency procedures. Usable oil inventories (No. 6 and No. 2 combined) in late October remained at 51% of maximum levels, as compared to 58% at this time last year, which is evidence that there has not been any increase in stored fuel in the past month. ISO-NE noted that over 6.5 GW of distillate fuel oil resources (primarily dual-fuel CCGTs) would be unavailable after five days of continuous operation absent replenishments.  ISO-NE is concerned that a longer cold snap (or a lack of replenishments) would put the system at risk.  More broadly, ISO-NE is concerned that its present markets and incentives may not provide a longer duration energy supply ‘cushion’ needed in winter months. The ISO will provide a similar winter outlook report at the December Participant’s Committee meeting.  
  • New York’s Department of Environmental Conservation (DEC) denied air permits to two natural gas plants seeking to repower: NRG’s Astoria plant and the Danskammer plant in Orange County.  NRG proposed replacing its 646-megawatt plant with a 437-megawatt plant and Danskammer in proposed replacing its 530-megawatt plant with a 535-megawatt project.  The DEC cited the states climate law on their decision noting that neither plant was needed for grid reliability.  Project developers proposed plans to use more efficient fuels like hydrogen or renewable natural gas, but the plans were only speculative and there’s been no determination yet if renewable natural gas generation will be permissible under the state’s climate law. 

ERCOT Energy Summary

CAISO, Desert Southwest and Pacific Northwest Energy Summary

  • SoCalGas inventories are pushing levels unseen since the Aliso Canyon blowout in 2015 that resulted in storage capacity being greatly curtailed. Following the CPUC’s vote earlier this month, storage capacity at the field was lifted about +20% (or +7 Bcf) over the previous limit, taking the new max to the second decimal at 41.16 Bcf. With California riding near summertime temperatures deep into November and limiting the need to burn gas for heating, SoCalGas has been able to inject molecules at a rapid pace, adding nearly +1 Bcf to Aliso Canyon last weekend alone. This brings the field to about 38 Bcf of storage, leaving only a little over 3 Bcf of space remaining and pushed total inventories across the SoCalGas system to 86 Bcf. Levels are about +7.5 Bcf over where they were a year ago, leaving them only 5 Bcf from hitting tank tops. Given the weather outlook for the next couple of weeks and some typical slowdown in industrial burns during a holiday week, SoCalGas is on track to have the Aliso cavern full before we finish plowing through leftovers the weekend after Thanksgiving. This past Friday, on the heels of the weekend cash plummet to $5.09/MMBtu, the SoCal Citygate balance-of-month price fell -$0.71 to $5.87. The rest of the winter strip also came under fire after the market realized that there will be nothing left to hold up the balancing after the injections are completed. While the highest inventories on the SoCal system in six years provide downside risk to SoCal Citygate prices this winter, the caution to buyers is that the CPUC did not make any changes to the onerous Aliso Canyon Withdrawal Protocol, which limits withdrawals to periods of extreme need to maintain reliability. In simple terms, this means that SoCalGas can fill the cavern at will, but boxes must be checked before they can take the gas back out. If temps fall and demand rises rapidly on the system, prices will follow until SoCalGas finishes checking those boxes.
  • The CPUC also recently renewed for a third time the “temporary” penalty structure for those who trip the OFO wire in SoCalGas territory. Under the winter penalty structure, consumers who are out of bounds on their noms encounter a tariff that has eight tiers of non-compliance. The most notable difference in the revised rules pertains to Stage 3. Instead of the OFO penalty increasing from $5 to $25 between Stages 3 and 4, the new rules create intermediate Stages 3.1, 3.2 and 3.3 which impose penalties of $10, $15 and $20, respectively. This clues you into how there isn’t enough to go around during the winter months when residential and commercial customers looking for warmth must compete with industrials and power gen for the marginal molecule. The latest temporary extension is in place for six months out from November 1st.
  • A recent report out of an economic and public policy shop called M.Cubed suggests that reliability issues on the California grid are having unintended consequences. Their research indicates that the number of backup gens across the state has skyrocketed in the past year, jumping by +22% in the South Coast Air Quality Management District and by +34% in the Bay Area Air Quality Management District over the past three yrs. In 2021, the two districts were collectively home to 23,507 backup generators with a capacity of 12.2 GW, about 15% percent of California’s entire electricity grid. Nearly 21,000 of these gens are diesel-fueled, reflecting a Yosemite Valley-class gap between efforts to green the grid and consumers’ willingness to rely on fossil fuels to keep their lights on.

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