Thoughts about the Last Weeks of July 2017

Thoughts about the Next Couple Weeks…

  • Ontario should average high 20 with low volatility, high average HOEP and boring as a research paper on energy emissions
  • Average Temp is impressive over the next few weeks, the IESO will bring the GAS think Tues July 11th
  • If wind shows up with this heat it will drop HOEP as the IESO leaves gas on to protect against forecast errors, ie downside risk with limited upside
  • Remember the MISI might be back at full moving the interface from 800 to 1100ish
  • Think 25 to 29 with no wind and 5 to 8 with 2k of wind, there will be some wind at sometime and for some interval longer then a hour

 

  •  The next two weeks in PJM should look like this week, but the volatility should start.
  • Units have been running flat out for a while now, they got to start breaking soon
  • The mid to high 30s sounds about right with some crazy upside spikes to it
  • Look to buy RT futures in the low 30s to and then dump into a spike
  • Shorts should be in DA, need to have a 4 handle and you also need a solid reason why the ISO messed up the load forecast or dispatch

 

  • MISO… GOD YOUR BORING, mid to high 30
  • Buy low 30s in RT and sell high 30 in DA
  • Deliver MWs to DECO, in the DA its not much worse than PJM_IMO and it closer to home
  • The DART favors high DA at high load levels.

In Summary Jul 17-21, Similar to 24-28 (5×16 7×8 2×16)

HOEP    22@25    -4@0    6@14 (can’t call 2×16)
PJM WH DA    35@39    20@22    28@32
PJM W RT    35@41    20@22    27@34
MISO    35 @ 37    Yawn    ZZZZ

Note:
I am legitimately concerned that if the MISI tie come back to full Ontario will change, congestion might fall at the interties and HOEP may rise. If we get confirmation of this on Monday, we will take corrective actions.

# Forecasting # Late Summer # Low Gas # High Heat

Thoughts about first heat wave – Buy the rumor sell the fact

  • Often the first heat wave of a year is a chance to buy early as the typical traders seems overestimate the impact of the heat.
  • The overestimate leads to financials being bought up and very responsive to bullish model changes as fast money keeps buying after any increase in the forecast.
  • Ultimately the market is usually well prepared for the first heat wave. The gen fleet is in good condition and back from a long outage season, control areas want to show they are prepared an over committee units.
  • The sell opportunity usually comes just before delivery and maybe signalled by a high volume low price range day at an extreme price
  • These thought do not necessarily transfer to a heat wave later in the season for example September heat

ICEMAN