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AM Power Report: Prices could sag as fundamental support lags

Power values for next-day delivery could have a weak showingTuesday, July 26, as predominantly declining demand projections for midweekconspire with ongoing losses at the natural gas futures complex.

Losing 3.0 cents in the prior session, August naturalgas futures dropped even lower overnight, last pegged at $2.715/MMBtu ahead ofthe contract’s expiration Wednesday afternoon. September natural gas futureswere down 3.1 cents to $2.681/MMBtu early Tuesday.

In conjunction with the continued weakness in the futuresarena, day-ahead natural gas prices are likely to steer lower Tuesday at mostof the major consuming hubs, which is likely to offer additional pressure onregional power values.

Onthe demand side, load outlooks for midweek are varied but mostly pointed lower.

Inthe Northeast, demand in New England could hold near unchanged at peaks at23,800 MW on Tuesday and 23,820 MW on Wednesday, while New York load coulddecline to highs at 29,826 MW on Tuesday and 29,735 MW on Wednesday. In theMid-Atlantic, weaker load is in store, as demand in the PJM Western region isexpected to top out at 74,675 MW on Tuesday and 72,534 MW in the middle of theworkweek, while load in PJM Mid-Atlantic is called to reach 54,882 MW onTuesday and 51,976 MW on Wednesday.

Inthe Midwest, forecasts suggest softer load, as PJM AEP region demand is poisedto crest at 21,768 MW on Tuesday and 21,108 MW at midweek, while load in PJMComEd should touch a high near 19,568 MW on Tuesday and 19,277 MW on Wednesday.

InTexas, the ERCOT grid operator sees demand reaching highs at 61,551 MW onTuesday and 64,379 MW in the middle of the business week, running against thewider decline. In California, demand in CAISO should near 43,711MW on Tuesday and 44,968 MW on Wednesday.  

Alongthe forward curve, power prices for August predominantly deflated in the week'sopening session, as traders considered cheaper fueling costs implied by adowndraft at the natural gas futures arena.

Inthe East, the front-month power offering changed hands in the high $30s indeals posting a near 30-cent increase on the day against the wider decline atNEPOOL-Mass but notching a reduction of about $1 at PJM West. Looking ahead,power parcels for September were transacted in the low $30s at both hubs.

Inthe Midwest, losses on either side of $1 steered price activity for Augustpower to indexes in the mid-$30s at PJM Northern Illinois and in the high $30sacross PJM AD and MISO Indiana. Along the forward curve, power values forSeptember spanned the low $30s overall.

Inthe South, the ERCOT markets saw month-ahead power transactions unravel roughly$4 across the board to average in the high $50s overall, while regional tradingaction for September power was spread in the low $30s.

Inthe West, pricing for August power retreated by more than 90 cents to indexesin the high $30s at both North Path-15 and South Path-15 in California, asMid-Columbia August and Palo Verde August tumbled by $2 to average in the low$30s and also in the high $30s, respectively. Price action for September powerwas pegged in the mid- to high $30s in California and in the high $20s to thelow $30s elsewhere in the region.

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Market prices and included industry data are currentas of the time of publication and are subject to change. For more detailedmarket data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.