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Forwards recap: Term markets embrace losses as September power takes lead

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Forwards recap: Term markets embrace losses as September power takes lead

Major term markets favored losses during the week ended Aug. 4 driven mostly by the transition of prompt-month products from August to September and decreased fueling costs owing to a decline in gas futures.

The front-month September natural gas futures contract kicked off the review week July 31 pulled down by weather forecasts calling for subdued demand, which led to a 14.7-cent loss to a settlement at $2.794/MMBtu. September gas managed to regain some ground Aug. 1 following a round of bargain hunting despite a lack of fundamental support, which allowed bulls to lift the contract by 2.5 cents to $2.819/MMBtu.

The midweek Aug. 2 session saw front-month gas revisit the downside at $2.811/MMBtu, down 0.8 cent ahead of the release of the latest storage data from the U.S. Energy Information Administration the following day.

However, despite reports of a less-than-expected 20-Bcf net injection during the week ended July 28, front-month gas remained tethered to the downside Aug. 3, notching a 1.1-cent loss to settle at $2.800/MMBtu. The downtick continued Aug. 4 with unsupportive weather forecasts bogging down the contract down by 2.6 cents to $2.774/MMBtu. All in all, September gas slipped by 2.0 cents during the review week spanning July 31 to Aug. 4.

At wholesale electricity markets, the prompt-month product across most regions saw a decline mostly due to the switch between packages for August to September delivery with additional downward pressure from subdued fueling costs following a modest downtick in gas futures.

Noting the biggest losses of the session were prompt-month packages at ERCOT North, which started out for August delivery on July 31 at $42.07, switching over to the September product at $28.86 on Aug. 1 and reaching $28.40 by Aug. 4, down by $13.67 for the week.

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Hubs in the West also noted sizable losses. An $11.63 decline was posted at Mid-Columbia, where prompt-month packages started out for August flow on July 31 at $38.88 then moved to September product on Aug. 1 at $26.74 and reached $27.25 by Aug. 4. Palo Verde term deals kicked off the review week for August delivery at $36.00 on July 31 then moved to September flow at $29.29 on Aug. 1 and hit $27.69 on Aug. 4, down $8.31 throughout the period. In California, South Path-15 saw August deals done at $45.50 on July 31 before turning over to September at $38.41 on Aug. 1 and reaching $38.22 on Aug. 4, shedding $7.28 in the process.

The transition of prompt-month products also precipitated losses across forward power markets in the East. At the New England Mass hub, power packages were initially exchanged for August at $35.75 on July 31 then September at $30.12 on Aug. 1 and $27.94 on Aug. 4, down $7.81. Forward deals at New York Zone G entered the workweek for August at $36.62 on July 31 then moved flow for September at $30.33 on Aug. 1 before closing at $30.13 on Aug. 4, dropping $6.48 during the period. In the mid-Atlantic, forward transactions at PJM West were posted for August at $34.71 on July 31 then September at $32.29 on Aug. 1 and ended the week at $32.11 on Aug. 4, notching a $2.60 loss throughout the week.

Term markets in the Midwest also moved lower. Along the PJM Northern Illinois forward curve, power deals were initially done for August at $35.21 on July 31 then September at $31.58 on Aug. 1 and closed the week at $31.55 on Aug. 4, down $3.65. PJM AEP-Dayton trades were priced for August at $35.88 on July 31 before shifting to September transactions at $32.89 on Aug. 1 and hitting $32.50 on Aug. 4, shedding $3.37. At MISO Indiana, forward power was quoted for August at $36.31 on July 31 then saw September deals at $34.26 on Aug. 1 and closed the week at $34.05 on Aug. 4, notching a $2.26 loss for the period.

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Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas and coal index prices, as well as forwards and futures, visit our Commodities pages.