ERCOT pricing in check – yesterday real time pricing cleared $22.00 and $17.75 (give or take a bit) in the North Hub – we had significant congestion from the West Hub, where on peak pricing in the West cleared $3.75. These prices were much below the DAM on peak clears of $26.33 North Hub and $18.03 for the West Hub.
Today – bilateral price traded around $29.00 for the on peak and $22.75 for the off peak – nothing of significance traded on the power basis. All in all, daily heat rates are down since cash NG was much higher day over day.
ERCOT forward heat rates – lower moves on the Cals – driven by summer weakness.
Natural Gas – after a strong day yesterday, NG took a breather in early trading. Weather forecasts didn’t significantly change overnight (still big Eastern US cool down next week), but NG also traded up near the previously mentioned “top of the range” of $3.40. Not sure what it will take to punch through this level – we have demand – Technical strength? Supply story? Keep in mind – End of season storage of 2Tcf is not bullish in my mind without a declining production picture.
Crude – Weak on the day. The decline in Brent and increasing stockpiles in the US are cited as contributors by Reuters. Keep in mind, Iranian nuclear talks in Kazakh city of Almaty (btw, where is this??) may have an influence on global oil prices.
US Economy – From WSJ…”You have people coming back into the markets thinking the long-term fundamentals are looking solid,” said Sean Lynch, global investment strategist at Wells Fargo Private Bank, which manages $169 billion. “Italy shouldn’t have a meaningful impact on the fundamentals of the U.S. economy.” Thank you – Finally someone else gets it. Although, in our humble opinion, Mr. Lynch is mostly correct, considering he stated “…markets {only} THINKING the long-term…”.
In supportive news, the Case Shiller Index on home prices rose 6.8%, .01% better than expectations for December. Many feel resurgence in the housing market will turn the economy around – we agree to an extent, however with recent CPI increased for January by 0.3%, which doesn’t include energy or food. The energy index fell 1.7% in January – seemingly hard to believe. To us this is almost meaningless to gauge the strength of the recovery, since what else do you spend the core of you dough on – other than energy and food? You can have strength in a housing market based on sales price, but if the majority of people are spending their core cash on daily budget items and retirement savings ( LOL ), who can afford a saving for that down payment. You just won’t have that durable demand growth without an “X” factor.
Ben Bernanke is quoted today…”To this point, we do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery and more rapid job creation,” (pulled from CNBC.com).
Such a warm bedtime story…
NG – $3.427
Crude – $92.63
SP500 – 1496.94
US 10-Yr – 1.885
Gold – 1613.10
Jason Gwynne