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Forwards recap: Gas gains support term power as May takes lead


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Forwards recap: Gas gains support term power as May takes lead

Price action for front-month power delivery was mixedto predominantly higher during the week ended April 1, as downside pressurescaused by softer demand forecasts were offset by higher fueling costs impliedby gains in the natural gas futures complex.

The NYMEX front-month April natural gas futurescontract opened the review week March 28 favoring gains ahead of its expirationthe next day, with the upside driven by revisions in weather forecastssupporting demand but limited by the calendar and the healthy natural gassupply. April gas closed the day at $1.848/MMBtu, higher by 4.2 cents.

April gas continued to build value March 29, with theweather-backed lead contract expiring on the positive side of the ledger at$1.903/MMBtu, up by 5.5 cents. Not far behind, the May contract finished at$1.981/MMBtu, adding 4.5 cents on the session.

May gas spent its debut session March 30 defending theupside with support coming from weather outlooks and an expected return towithdrawals when the U.S. Energy Information Administration releases its reportthe next day. The new lead contract settled higher by 1.5 cents at $1.996/MMBtu.

The March 31 storage data showed a net from naturalgas inventories in the Lower 48 during the week ended March 25 that wasslightly above consensusexpectations and above historical averages. Despite a slightlybullish pull, the market instead focused on the total working gas supply and expectationsthat the current week's withdrawal will be the last of the season, whichprovided bears enough of an incentive to drag front-month gas back to thenegative side of the ledger at $1.959/MMBtu, tumbling by 3.7 cents.

Total working natural gas supply and the imminentarrival of milder weather continued to bog down May gas on April 1, whichallowed bears to keep the front-month contract on the downside, ultimatelyending the review week down by a scant 0.3 cent. In spite of the losses, theMay contract still added 10.8 cents throughout the review period.

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At wholesale electricity markets, power deals duringthe review period saw a shift of the prompt-month offering from April to Mayoccur during the final day of the workweek, with the latter ultimately having aweak showing as the new lead due to lackluster demand but still derivingsupport from an increase in fueling costs caused by gains in natural gasfutures.

Term deals at PJM West saw the biggest increasesthroughout the week, with the April product trading at $30.83 on March 28 and$32.90 on March 31 before transitioning over to the May offering at $34.31 onApril 1, for a weekly gain of $3.48.

Elsewhere in the East, the power products for Apriland May delivery notched gains amid support from a rise in fueling costs.NEPOOL-Mass April was pegged at $30.83 on March 28 and $33.67 on March 31,above the May packages at $32.15 on April 1 but still adding $1.32 throughoutthe week, while prompt-month trades at New York Zone G saw April offers pricedat $25.27 on March 28 and $27.60 on March 31, which were below May transactionsat $28.20 on April 1 yet still posting a weekly gain of $2.93.

In the Midwest, forward trades at most markets alsoreflected gains driven by an increase in fueling costs offsetting dampeneddemand suggested by moderating weather forecasts. PJM AD April was quoted at$28.79 on March 28 and $30.86 on March 31, before exiting as the May product at$31.85 on April 1 for a premium of $3.06 throughout the period. Offers forApril delivery at PJM Northern Illinois were eyed at $26.50 on March 28 and$28.64 on March 31, switching over to the new lead at $28.35 on April 1increasing by $1.85 during the week. April power at MISO Indiana continued thetrend, with power packages exchanged at $27.06 on March 28 and $27.60 on March31 then transitioning over to May delivery at $28.60 on April 1, for a weeklygain of $1.54.

Power packages in Texas saw subdued demand keepinggas-driven gains in check, with ERCOT North April trades opening at $23.05 onMarch 28 and $23.52 on March 31 and changing over to the new prompt-month offeron April 1 at $23.92 gaining a scant 87 cents for the review week.

Term markets on the West, on the other hand, sawsofter load outlooks counterbalancing the uptick in fueling costs and keptprices tethered to the downside throughout the period. Forward products atSouth Path-15 entered the review week for April delivery at $20.86 on March 28,stumbling to $20.36 on March 31 and exiting the week at $19.32 on April 1 asthe new lead product for a weekly loss of $1.54. Mid-Columbia power packagesspent the majority of the workweek with April as the lead, starting at $12.27on March 28 and moving to $12.39 on March 31 before turning over to May tradesat $9.56 on April 1, losing $2.71 for the period. Term deals at Palo Verde wereable to limit the weekly downside to 75 cents, with April offers entering at$17.75 on March 28 and exiting at $18.15 on March 31 before finally switchingover to May delivery at $17.00 on April 1.

Market prices and included industry data are currentas of the time of publication and are subject to change. For more detailedmarket data, including power,natural gas andcoal index prices, as well asforwards andfutures, visit our Commodities Pages.