Best Power Trade Summer 2015 – 100% Gain High Probability
As noted in my recent article, demonstrating the great performance of PMA to be able to find winning power trades – 50 Percent Gain on Winter Trade! Another Successful Demonstration of PMA, I prefer to trade one season out excluding the shoulders. Unless something is a screaming buy or sell in the shoulders I typically avoid it given the limited load movements and unpredictable maintenance cycles.
Given our success in winter I wanted to get a jump start for summer so we have run over 60+ simulations for this summer. Including our base runs and following the same analytical approach which incorporates a historical analysis and our screening tools, we have identified some significant market dislocations from the forward curve to the realities of the market place.
Also noted in my previous article, I believe I have demonstrated and documented the efficacy of the modeling approach with 3 correct calls in a row (Summer, Winter 1, Winter 2) . Therefore, we will not likely give away trade ideas anymore. The return of one of our spread trade we have identified is priced to earn over 100%. This is no joke. I have all the analysis behind this trade and look forward to working with paying clients to capitalize on this trade. Power markets, given the collapse in trading and the complexity involved, do offer on occasions these types of trades. This June spread will be able to give you positive returns in less than 4 months.
Trading power if done right will bring positive results. The last two years the power trading markets failed as many traders failed to translate the low gas prices and what they meant to power prices. PMA-NT is proven to understand these commodity changes and what they mean for power. In addition, my trading recommendations stay away from these absolute issues and I focus on spreads and heat rates thereby mitigating some of the commodity risk.
PMA signals have recently changed from a sell mode for most of last year to now identifying some great buying opportunities. For many end-users if you are looking to hedge power now is the time and we can show you why and where. For several power generators my advice to you is ride it out enjoy the spot markets your downside risk is limited. This is location specific so you do need to call or email me to get the right information for your situation.
Please call me if you are interested in receiving the list of our summer trade recommendations and the analysis that goes behind it. We are so confident in our modeling we offer very flexible terms that we get paid only if you get paid (I got that from an infomercial):
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Fixed charge with a money back guarantee on a winning portfolio of recommendations (winning portfolio > 0%).
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No money down a portion of earnings based on trade portfolio performance.
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Subscription to PMA-NT gives you the complete summer analysis and all the daily runs each and every day. Customization to create your own set of daily scenarios.
This is extremely time-sensitive as the market will start correcting itself for these dislocations. If you want to show a successful power trading portfolio you need to reach out to me as soon as possible. We are here for your success – now and into the future.
Your Enthused Energy Analyst,
David
David K. Bellman
Founder/Principal
All Energy Consulting LLC- “Adding insights to the energy markets for your success.”
614-356-0484
[email protected]
@AECDKB
How low will oil go?
I tried to avoid this answer for many reasons. My hesitancy in answering is due to my jagged edge of experience in trading commodities. The price of a commodity, in a fixed given time period, does not have to hold any fundamental characteristic. In today’s world of constantly being “online”, traders chase the next move through any means including reading into a statements made by OPEC members. As much as today’s spot price of oil predicts the price of oil 6 months from now, the same applies to the futures market price (How much? Answer: Not Much).
The price now for oil, whether spot or futures, represents the condition of buying, selling, and managing internal storage with a system of risk of tomorrows price. If the market believes the oil prices can go lower, you have fewer buyers as they would rather use their inventory until a point the price holds too much risk it will be higher. If the market believes the oil prices will go higher you have more buyers wanting to build inventory and will buy it to the point the price holds too much risk it will be lower. There are losing and winning trades throughout the year.
Right now you have a bunch of “losers” who have locked in oil prices at way higher prices. Hedging is dangerous when your market competitors don’t and your prices for your service/product can be eroded by competition. There is not much intelligence when one hedges all your volumes at once. A balanced hedging program should step into the changing markets. An effective oil hedging program would have allowed the market to fall while gradually adding to the hedge over time. Calling the bottom of the oil price would be as lucky as trying to catch the handle on a sharp falling knife from a 10 story building. It is possible, but not likely. An effective hedging program would let the knife fall and realize you won’t catch the bottom, but you won’t ignore it either.
The bottom price of oil will likely not occur without an event. Traders need to see the market is responding before stopping the momentum of a falling knife. Unfortunately, the oil markets are operating on sunk cost investments. A reaction on drilling and production will take time. I believe one of the first signals for a slowdown of production will not come from the physical production declines, but from the insistence of the debt holders to quantify what they own. The operating company management team will likely go ahead and produce whatever they can – the debt holders will want them to stop so they quantify the volumes and use those volumes to payback the debt. This will take time to play out via bankruptcy. The other reaction to low prices will come from the demand side. This is winter for the largest consumers of petroleum. Demand can only rise so much now. However, as we move into spring and summer, expect a rebound in demand. The ironic statement is that the current market is not so trusting of the market to react.
Oil prices can continue to fall. However, as a business, I would not be planning based on this market aberration. The fundamentals will re-align the markets as real data and information becomes available, and actions by participants occur. This could take as long as 6-12 months. I still believe oil prices due to the global nature realign itself in 6-12 months north of $60/bbl. Some have tried to compare the drop in oil to the drop in US natural gas price, which has not really rebounded. However, US natural gas markets are not global – yet – and potentially never will be as LNG and GTL investments are likely being questioned with low oil prices. The issues we discussed that will drive this market hasn’t changed – Oil Market Doomsayer.
If you are dependent on oil prices and have never hedged your purchase, this could be an opportunity to develop a systematic method for hedging some of your oil needs. A true hedge creates a system to manage your budgets while balancing your business and energy risk. Hedging programs should never be constructed to make money or save money. If so, you are now trading, which is a valid business option if you have the appropriate experience.
Please consider All Energy Consulting for you energy consulting needs. We add insights to the energy market for your success for now and years to come.
Your Energy Analyst Not Interested in Catching Falling Knives,
David
David K. Bellman
Founder/Principal
All Energy Consulting LLC- “Adding insights to the energy markets for your success.”
614-356-0484
[email protected]
@AECDKB
50 Percent Gain on Winter Trade! Another Successful Demonstration of PMA
Not to sound like an infomercial, but PMA-NT and the analytical power at All Energy Consulting can find winning trades for you. If I cannot persuade you to at least view PMA-NT with 3 correct calls in a row you are probably set in your ways and I wish you much trading success (Summer, Winter 1, Winter 2) . I did make two trade suggestions last call – Another 30% return in Month Time? – Next Trade De Jour. One of the trades did lose money, but only 4% as the heat rates in ERCOT-North held up in the financial markets. I believe the cash market still has a chance to show the trade was fundamentally sound. However, our other call buying the March AD-HUB minus NYJ On-peak spread is up over 50%. At the end of November, we noted the spread at $-23/MWh and we believed it should be closer to $-12/MWh. I suggest you close the position as the current spread ($-11.53/MWh – 1/12/15) is now smaller than the base run.
I do hope power traders are being successful as the power trading world has taken a huge hit over the last two years. The backbone of PMA-NT is designed for power trading. However the market has been somewhat skeptical about the analytical capabilities of PMA-NT. We presented these calls using the PMA-NT models along with our analytical capabilities and power market expertise to find these trade calls. Every day the default model runs over 5000 potential trade idea – as the model runs the entire N. America plus 5 scenarios for 3 years. We realize, with the power traders exiting the market, the liquidity has dropped. Therefore, our focus for trading is now no longer than 1 season out. The powerful trade screeners can quickly identify potential future dislocation – then we can process those trade ideas through our 60+ scenarios plus our historical screeners to quantify the risk reward profile of these trades. Adding your expertise in the market will only make these trades even better.
The recommended trades we discussed are focused in the region in which we have the most understanding. However, PMA-NT is designed for ultimate customization. We can incorporate your expertise along with the platform and our analytical capabilities to produce a selection of winning trades. If you haven’t been making 20-30+% every season, it is time to give PMA-NT a chance.
For those not trading, but owning an asset or an end-user buying power – PMA-NT can be customized for you so you can comprehend and quantify your market risk. Given our models are so accurate for trading, they can surely be used to assist you in understanding your weather risk to your natural gas price risk. PMA-NT can enable you to better plan and budget and potentially be incorporated into a hedging strategy. At AEC, we have the capability to review all your power contracting options and select or design the perfect contract, which balances your energy and budgeting concerns. Please do call and I will personally make sure we offer the insight to make you successful – 614-356-0484.
We are here for your success.
Your Energy Analyst Looking Out for You,
David
David K. Bellman
Founder/Principal
All Energy Consulting LLC- “Adding insights to the energy markets for your success.”
614-356-0484
[email protected]
@AECDKB
Whitepaper – Key Pieces to Modeling Power Effectively
As noted in the beginning of the year for 2015, we will work on producing a clear message to our readers, clients, and prospective clients about our commitments and value proposition. We are committed to adding insights to energy markets for your success – today and for years to come.
As part of the commitment, we begin with knowledge sharing by introducing a whitepaper on power modeling. Understanding the key pieces of modeling power will allow you to begin your endeavor in this challenging but very rewarding effort. This whitepaper will outline the areas of focus and also make a few high level points. We hope this will help you in your efforts, and as always, we hope you consider All Energy Consulting as an option for assisting in implementation or potentially using our PMA platform as an introduction into your power modeling efforts.
Please Click Here to Download the Whitepaper – Key Pieces to Modeling Power Effectively
AEC realizes you have many options in the markets when it comes to energy consultants. I want to state now – no other consulting company will be more committed to sharing knowledge – not just information – for your success than All Energy Consulting. We are not hesitant to empower you and your team to the point where our consulting role may be limited in the future – we treat this as a success.
Your Very Willing to Share Energy Analyst,
David
David K. Bellman
Founder/Principal
All Energy Consulting LLC- “Adding insights to the energy markets for your success.”
614-356-0484
[email protected]
@AECDKB
Year of Model Building 2014
2014 Modeling Efforts
At All Energy Consulting, we specialize in modeling the energy markets. To give you a sense of our capabilities, below are the list of models built in 2014.
Reviewing the list, it reminds me of the saying :
“People who love what they do wear themselves down doing it, they even forget to wash or eat….When they’re really possessed by what they do, they’d rather stop eating and sleeping than give up practicing their arts.” Marcus Aurelius, Meditations
Please do consider All Energy Consulting for your energy modeling needs. I truly enjoy what I do and it will show in my work and commitment to you – Thanks for 2014.
David
[email protected]
614-356-0484
Oil & Gas
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Built a USGC refinery model in various configurations – Hydroskimming, Cracking, and Coking
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Discounted Cash Flow Model for Refinery Acquisition and Refurbishment
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USGC and Caribbean petroleum pricing model
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Modeled the US Natural Gas Deliveries to Electric Power Consumers by State
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Modeled and Calculated the discount value for Eagle Ford Condensate
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Built World Supply/Demand Balance Model for Crude Oil and Petroleum Products
Power
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Assisted Platte River Power Authority (PRPA) in deployment (setup, build, and operate) of a power model used for their Integrated Resource Plan
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Several Discounted Cash Flow Model for Power Generation Asset – 800 MW CC to 1MW Reciprocating Engine including the associated power modeling work
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Worked with the University of Texas Center for Energy Economic on modeling and publishing papers regarding ERCOT
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Modeled EPA Clean Power Plan and published paper in Fortnightly
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Modeled and produced a risk analysis for a set of generating assets
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Long-term Power Modeling along with integrating GCPM gas pipeline model
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Built and Operate Power Market Analysis (PMA) Platform – includes integrated trade screeners to integrated natural gas storage models.
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Built an interactive load model for 118 load zones representing N. America
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Built a coal pricing model to deliver and price coal to all 1000+ coal units in N. America
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Discounted Cash Flow Model for an Integrated Desalination Plant with Associated Power Generation and Recycle Facility for Waste Water from Fracking
Models are only as good as the inputs and the ability to decipher the outputs to business solutions. More information on modeling and other services can be found on our website.
