GRID Market Commentary

February 25th, 2013

ERCOT has been relatively calm lately last week temperatures reached slightly above normal which created weak DAM and RT prices. We witnessed price volatility in real time when the wind forecast under-performed during the ramp hours and the Valley reached 85+ degrees with several units out…Today will be interesting with 25% of the grid’s supply coming from Good ‘Ol Reliable Wind.

Tomorrow, ERCOT load reaches 40 gigs in the morning – chilly morning ramp. Most of the state warms up to normals to slightly below normal – DFW mid to upper 50s over mid 30s. Day ahead bilaterals traded roughly $30.50 and $22.50, on and off-peak – North appears to be slight premium to all.
ERCOT forward Heat Rates down about .10 to .15 tics across the prompt cal – this move is mostly attributed to the dramatic move UP in NG – March looks to be coming in colder in ERCOT.

NG – Huge move up in natural this am – forecast maps do not appear much different than Friday’s models, which drove prices higher late Friday. Out of the gates today we raced up to resistance (discussed throughout the month) – around $3.40 – clearly ran through the downward trending pattern. Not sure if weather can get much more bullish to create a significant change in the season end storage surplus – again maybe something is going on with production.

CL – not much to the layman here – slightly down on the day.

US Economy – Nothing new here. From WSJ…”U.S. stocks opened higher, joining a rally in global equities amid optimism around Italy’s elections and prospects for looser Japanese monetary policy.” This headline wouldn’t tell the story later in the day when the major benchmarks declined upon the report of Italy’s Berlusconi’s political party could be gain in the general election – apparently this group isn’t supportive of the austerity measures the Italian government put in place to warm investor confidence.

Oh yeah – from the WSJ Headlines as well…”U.K. Downgrade Heightens Risks….The U.K. late Friday saw its triple-A credit rating from Moody’s MCO 0.00% chopped one notch to Aa1. The news isn’t as bad as it might have been: importantly, Moody’s has assigned a stable outlook…Moody’s key concern is that the U.K.’s dismal growth picture—gross domestic product has essentially flat-lined since 2010—will persist, and thus make harder the task of bringing down the budget deficit and ultimately reversing the rise in public debt. …Moody’s also highlights a risk that should worry policy makers in all highly indebted economies: that efforts to improve the situation may not succeed in bearing fruit before another economic shock or downturn hits. The stable outlook, after all, may only give the U.K. 12 to 18 months of ratings grace.”

Stateside, Dallas FED index suggested Texas manufacturing expanded at a slower rate than January.
This continuous bad news is good and worse news better is getting tiresome and problematic for our future. How about some market direction on true, uninfluenced, unfiltered economic news? Sure, corporate earnings have been in-line with many expectations, but only with the help of government spending. How does our economy move without the economic crutches? Maybe the recent intra-day volatility within domestic markets is evidence of something turning – maybe just profit taking.

NG – $3.414
Crude – $93.11
SP500 – 1487.85
US 10-Yr – 1.867
Gold – 1593.20
**near market close

Jason Gwynne