The EIA released its short-term outlook, mainly indicating a bearish slant for gas and power.
Key Takeaway #2
The economy is not forecasted to go into recession, and the winter forecast is similar to last year’s – warmer than the 10-year average. The natural gas storage forecast looks bearish for gas prices.
Key Takeaway #3
The gas price risk relative to the forward curve is much higher, indicating a good time to hedge some upside price risk.
Key Takeaway #4
Mining economics are down, as hash hit an historic level. Gas prices are up, but most power markets did not move up as much.
• The EIA released its short-term outlook, mainly indicating a bearish slant for gas and power.
• The economy is not forecasted to go into recession, and the winter forecast is similar to last year’s – warmer than the 10-year average.
• The natural gas storage forecast looks bearish for gas prices.
• The gas price risk relative to the forward curve is much higher, indicating a good time to hedge some upside price risk.
• Mining economics are down, as hash hit an historic level.
• Gas prices are up, but most power markets did not move up as much.
Premium Content
Unlock exclusive insights with our cutting-edge digital finance platform. Gain access to next-gen data analytics and digital asset products crafted with applied science. Subscribe now to stay ahead of the curve.
The U.S. Energy Information Administration (EIA) released this week itsshort-term energy outlook (STEO). EIA forecasts typically are not accurate, but they do offer good insights on what is going on in the energy sector and identify key risk factors to monitor. The basis of the forecast is S&P’s economic outlook, which shows no recession: “Our forecast now estimates that GDP grew at an annualized rate of 4.0% in 3Q23, up from 2.2% growth from last month’s outlook.”
The other important macro variable is the weather – EIA uses the latest NOAA outlook: “We forecast that the United States will average about 3,220 heating degree days (HDDs) this winter (November through March), which would be the same as last winter and slightly warmer than the average winter over the past decade, with 4% fewer HDDs than the 10-winter average.”
Natural Gas Storage
• An important fundamental driver for the natural gas market that impacts power prices is natural gas storage. With the assumed GDP and weather outlook, the storage picture shows relatively high inventory this fall.
• The EIA notes “At the end of October, we expect U.S. natural gas inventories to total 3,854 billion cubic feet, 6% more than the five-year (2018–2022) average for the end of October.”
• The winter never takes the storage level below 2000 bcf, which is very bearish. Even more bearish is that next fall, storage inventory is around 4000 bcf, which would indicate potentially negative gas prices.
Annual Natural Gas Trade
• The bullish gas fundamentals are the gas export volumes.
• Not only is gas being exported via LNG, but volumes via the gas pipeline to Mexico also continue to increase.
• This export volume would mean prices may resemble export prices, which are higher than US prices.
Natural Gas Price Intervals
• The EIA forecast is similar to the current forward curve, but it shows an extreme price range, as high as $10 but as low as $2.
• Given the forward curve, this would indicate that some hedging would be advisable.
Load Generator Costs
• The EIA report also briefly discusses the impact of gas prices.
• “For all of 2024, our estimated cost of natural gas-fired electricity averages $32/MWh compared with an average $29/MWh for coal. We expect these similar costs will keep the share of U.S. generation from coal near 15% on average in 2024.”
• Unfortunately, this type of analysis does not effectively cover the intermittent price spikes in regions like ERCOT.
• If renewable and load profiles were more predictable and manageable, such as a grid with an active mining load, the grid could reliably produce these type of prices.
Miner WoW View
• Mining economics improved week on week.
• The S19JPro breakeven price is between $60-$70/MWh. This should cause some rigs to turn off.
Henry Hub WoW
• Henry Hub was up WoW.
PJM WoW
• For the PJM region, we use PJM-W hub as the benchmark. PJM-W is the most traded power hub in the US.
• PJM prices saw minor changes.
Source: BitOoda, CME Group
ERCOT WoW
• For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
• ERCOT prices are up – they generally align with gas price increases.
Source: BitOoda, CME Group
CAISO WoW
• For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
• CAISO prices went up.
Source: BitOoda, CME Group
NYISO WoW: NY-G
• This slide uses the NY-G hub as the benchmark for the NYISO region. NY-G is the most traded power hub in NYISO.
• NY-G prices actually went down.
Source: BitOoda, CME Group
NYISO WoW: NY-A
• This slide adds NY-A for the NYISO region.
• NY-A prices saw minor changes.
Source: BitOoda, CME Group
Disclosures
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
The U.S. Energy Information Administration (EIA) released this week itsshort-term energy outlook (STEO). EIA forecasts typically are not accurate, but they do offer good insights on what is going on in the energy sector and identify key risk factors to monitor. The basis of the forecast is S&P’s economic outlook, which shows no recession: “Our forecast now estimates that GDP grew at an annualized rate of 4.0% in 3Q23, up from 2.2% growth from last month’s outlook.”
The other important macro variable is the weather – EIA uses the latest NOAA outlook: “We forecast that the United States will average about 3,220 heating degree days (HDDs) this winter (November through March), which would be the same as last winter and slightly warmer than the average winter over the past decade, with 4% fewer HDDs than the 10-winter average.”
Natural Gas Storage
• An important fundamental driver for the natural gas market that impacts power prices is natural gas storage. With the assumed GDP and weather outlook, the storage picture shows relatively high inventory this fall.
• The EIA notes “At the end of October, we expect U.S. natural gas inventories to total 3,854 billion cubic feet, 6% more than the five-year (2018–2022) average for the end of October.”
• The winter never takes the storage level below 2000 bcf, which is very bearish. Even more bearish is that next fall, storage inventory is around 4000 bcf, which would indicate potentially negative gas prices.
Annual Natural Gas Trade
• The bullish gas fundamentals are the gas export volumes.
• Not only is gas being exported via LNG, but volumes via the gas pipeline to Mexico also continue to increase.
• This export volume would mean prices may resemble export prices, which are higher than US prices.
Natural Gas Price Intervals
• The EIA forecast is similar to the current forward curve, but it shows an extreme price range, as high as $10 but as low as $2.
• Given the forward curve, this would indicate that some hedging would be advisable.
Load Generator Costs
• The EIA report also briefly discusses the impact of gas prices.
• “For all of 2024, our estimated cost of natural gas-fired electricity averages $32/MWh compared with an average $29/MWh for coal. We expect these similar costs will keep the share of U.S. generation from coal near 15% on average in 2024.”
• Unfortunately, this type of analysis does not effectively cover the intermittent price spikes in regions like ERCOT.
• If renewable and load profiles were more predictable and manageable, such as a grid with an active mining load, the grid could reliably produce these type of prices.
Miner WoW View
• Mining economics improved week on week.
• The S19JPro breakeven price is between $60-$70/MWh. This should cause some rigs to turn off.
Henry Hub WoW
• Henry Hub was up WoW.
PJM WoW
• For the PJM region, we use PJM-W hub as the benchmark. PJM-W is the most traded power hub in the US.
• PJM prices saw minor changes.
Source: BitOoda, CME Group
ERCOT WoW
• For the ERCOT region, we use ERCOT-North hub as the benchmark. ERCOT-North is the most traded power hub for ERCOT.
• ERCOT prices are up – they generally align with gas price increases.
Source: BitOoda, CME Group
CAISO WoW
• For the CAISO region, we use SP-15 hub as the benchmark. SP-15 is located in Southern California.
• CAISO prices went up.
Source: BitOoda, CME Group
NYISO WoW: NY-G
• This slide uses the NY-G hub as the benchmark for the NYISO region. NY-G is the most traded power hub in NYISO.
• NY-G prices actually went down.
Source: BitOoda, CME Group
NYISO WoW: NY-A
• This slide adds NY-A for the NYISO region.
• NY-A prices saw minor changes.
Source: BitOoda, CME Group
Disclosures
Purpose
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at info@bitooda.io.
Analyst Certification
David Bellman, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
General Disclosures
Any information (“Information”) provided by BitOoda Holdings, Inc., BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or throughhttp://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such.BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance.
All derivatives brokerage is conducted byOoda Commodities, LLC a member of NFA and subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2023 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.
