US Power Market Update - 8 Nov. 2021

Market Commentary

Thursday's natural gas storage report for the week ending 10/29 indicated an injection close to consensus expectations, coming in at 63 Bcf. This injection did surpass both the 5-year average build, as well as the injection for the same week of last year by a large margin.

Power market futures saw some much-needed relief this week, as the Winter '21/'22 strip continued to dip, along with remainder of 2021. Summer 2022 movement was mostly stagnant, with the exception of ERCOT and California, which saw pricing recede a bit. Longer-term positions improved as well, right across the board, with ERCOT giving back the most ground in calendar years 2022-2024, at roughly 5%.

The upcoming winter will continue to loom as the primary pivot point for where this elevated marketplace will trend. Overpriced futures are giving signs of pulling back, however budget- conscious end users will still find significant premium on uncovered short-term positions. A dose of sticker shock for short-term coverage will likely yield a more favorable long-term pricing picture when we emerge from the winter period, provided we don't see extended periods of bitter cold.

Regional LMP Movement

The most significant week-over-week LMP movement was seen in PJM, where spot rates surged 24% higher. ERCOT was up 10%, while New England, NY, and California continued to trend on a similar path to the previous week.

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