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November 7 Electricity Update
News from Sempra:
Today's +29 Bcf number is roughly 4 Bcf/day bullish year over year. The temperature gradient for the week is coldest on Thursday through Friday morning, and since today's number is a bullish flag, we think that our scrapes will continue to drop. We are lowering our estimate for next week to +13 Bcf, which we would model as 3 Bcf/day bullish year over year and roughly 1 Bcf/day bullish relative to the gas economy of 2008. This still keeps our model for the coming winter on a ~1,600 Bcf end March 2010 track, which drives our wildly exciting market call... wait for it... of "mildly bullish" summer 2010 pricing.
Tropical Depression Ida is currently over Honduras and should be moving North this weekend east of the Yucatan Peninsula where very warm water resides. Wind shear has been the destroying force all season, however, there is minimal shear in the path of Ida. It is expected that by early next week Ida will reach the Southern Gulf of Mexico and strengthen to a Tropical Storm at the least. Nothing else is on the radar screen for storms as we approach the last 3 weeks of the official hurricane season.
The NYISO has been ordered by FERC to release the names of 3 generators outside NYC that allegedly abused their market power. The 3 generators posted bids which resulted in excessive payments when they were committed out-of-merit. Details about what occurred will be sketchy as FERC ruled that most information will and should be considered confidential. Non-confidential data will be released within 30 days along with the generator names. The NYISO is proposing a mitigation process that will be applied to all 3 generators in an effort to eliminate their market power. There has been no hard and fast number released on the impact to the market or how it will be resolved with other market participants.
Crude oil and natural gas are off in early morning trading as we head toward the weekend. Crude traded above $80/bbl early and has since come off to the low $78/bbl range. Natural gas is struggling stay near $5/Dt as warmer weather and indications that El Niño might be considerably stronger than projected have applied downward pressure. December '09 is trading $4.66/Dt down over $.11/Dt as is most of the next 1 year period. All of the downward pressure on commodities is being applied to electricity prices as low demand has produced a stagnant market. Weather forecasts have the Northeast cold thru tomorrow morning and then things warm back to the high 50's and low 60's with sun which is fantastic weather conditions for November in New York. This weather will lend no support to prices at their current levels, but they are unlikely to drop much with Winter just around the corner.