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Forwards recap: Term power deals stagnate with gas despite heat

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021

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Essential Energy Insights - January 2021


Forwards recap: Term power deals stagnate with gas despite heat

Term power prices for August delivery had a mixedshowing during the week ended July 15, despite both strong cooling demandassociated with ongoing summer heat and increased fueling costs related togains in the natural gas futures complex.

In natural gas futures trading, the front-month Augustcontract opened the review week July 11 with the market doubting near-termweather support and instead turning its attention to a healthy natural gasinventory, which provided enough momentum to push the contract down by 9.9cents to $2.702/MMBtu. The August contract regained some ground July 12 asdemand expectations supported a 3.2 cent gain to settle at $2.734/MMBtu.

Uncertainty from a hefty natural gas inventory anderoding storage overhangs defined the July 13 session with front-month gasswinging between gains and losses before drifting to $2.737/MMBtu, up by ascant 0.3 cent. The July 14 release of storage data outlining a during theweek ended July 8 provided the market with a bit more volatility with Augustgas again seesawing between positive and negative territory before settling 1cent lower at $2.727/MMBtu.

The modest loss was reversed July 15 as strongweather-driven demand and shrinking storage surpluses allowed bulls to pullAugust gas up by 2.9 cents to exit the workweek at $2.756/MMBtu. With theslightly higher settle, the front-month contract added 5.4 cents overall duringthe review period between July 11 and July 15.

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At forward power markets, term deals for Augustdelivery chopped around, as certain locations were unimpressed by outlooks forhigher demand implied by summer weather forecasts and rising fueling costs dueto gains in natural gas futures.

Mirroring the movement in natural gas futures wereAugust deals at Palo Verde, which opened at $34.14 on July 11 and closed at$36.68 on July 15, for a week-on-week advance of $2.54.

In the East, power packages ticked slightly lower aspotentially robust demand and higher fueling costs failed to provide anysignificant upward support. Term deals at NEPOOL-Mass were pegged at $41.83 onJuly 11 and $40.27 on July 15, down $1.56 for the week, while PJM West Augustwas exchanged at $42.11 on July 11 and $41.09 on July 15, for a weekly loss of$1.02. A decline of $1.66 was seen with August trades at New York Zone G, whichwere quoted at $43.09 on July 11 and $41.43 on July 15.

In the Central U.S., term prices leaned mixed toslightly higher owing to greater cooling demand and increased fueling costs.MISO Indiana August was priced at $36.84 on July 11 and $38.10 on July 15,gaining $1.26 for the week, while PJM Northern Illinois added a scant 16 centswith August power traded at $36.92 on July 11 and $37.08 on July 15. Defyingthe trend were forward transactions at PJM AD, which were assessed at $38.05 onJuly 11 and $37.62 on July 15, slipping by 43 cents during the period.

In the south, August power trades at ERCOT North wereunfazed by higher demand and rising fueling costs with deals done at $74.50 onJuly 11 and $66.06 on July 15, for a weekly loss of $8.44.

Other forward markets along the West Coast postedmixed but muted moves. Mid-Columbia power for August changed hands at $28.26 onJuly 11 and $28.51 on July 15, for a 25-cent weekly gain, while South Path-15August power was transacted at $38.89 on July 11 and $38.75 on July 15,shedding 14 cents over the period.

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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,natural gas andcoal index prices, as well asforwards andfutures, visit our Commodities Pages.