Infinity Insights – Volume 9, Issue 29
AT-A-GLANCE SUMMARY
The past week witnessed a very tight supply/demand situation for Real Time pricing (LMP).
SUMMARY OF THE LAST WEEK IN CHARTS
Spot month natural gas (September) has support at 2.10, with resistance at 2.32. Calendar year 2020 has support at 2.35 with resistance 2.45. Calendar year 2021 has support at 2.540 with resistance at 2.54.For a look at our monthly market reports, visit Infinity Power Partner’s Market Overview.
RoadmapNYMEX natural gas spot month (September) finished higher by $0.081 at $2.20.
What’s This? – The “Roadmap” is the price action chart depicting the NYMEX natural gas spot month. It’s important because it is essentially the trading community’s market sentiment.
Cal 20Calendar 2020 was weaker by ≈$0.015 at $2.38.
What’s This? – “Cal 20” is the first complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.
Cal 21Calendar 2021 settled at $2.425, off by ≈$0.055.
What’s This? – “Cal 21” is the second complete 12-month strip. It gives you a visual of price action and provides a reference point for our take on the market.
OUR TAKE ON THE MARKET
The past week witnessed a very tight supply/demand situation for Real Time pricing (LMP). This is the open-ended price risk pricing at the margin. LMP has averaged under $30 for 2019 until this month.The extreme heat combined with tight reserve generation prompted spikes up to $9000 per interval. It is to be expected to provide surprises like this but still longer term average below other pricing options.The chart above is through August 15th. The heat extremes are behind us (?). Our expectations are for a return to “normal” price expectations. It will mitigate the dramatic picture before you. We prefer LMP pricing as it’s historically the lowest as well as the most volatile. The current spike is a good reminder of what the moving parts can do. It also cautions us going forward.The demand for capacity shows itself in heat rates. They turned sharply higher coincidentally to the spike. The charts, below, paint this picture:The LMP spike has been a real shocker. There are cash calls going out. The strategies of floating at least partially on Real Time have been severely challenged. Stay tuned.