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US Midwest spot gas, power dailies spike on extreme winter weather - S&P Global

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Midwest natural gas, power prices reach new highs

Demand expected to climb 32%

New York — US Midwest power and natural gas prices rallied Feb. 5 as freezing cold temperatures pushed regional demand higher.

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US Midcontinent natural gas prices spiked Feb. 5 for flows Feb. 6-8, with the cash price for Natural Gas Pipeline-Nipsco climbing 64 cents on the day to $3.59/MMBtu and NGPL-Midcontinent Pool rising 46 cents to 3.33, their highest levels since March 2019.

These price increases come as temperatures across the region began to plummet and are expected to have a 80%-90% chance of below normal over the next 8-14 days, according to the US National Weather Service. Chicago temperatures Feb. 5 are averaging a high of 17 degrees and are anticipated to reach a low of minus 5 degrees Feb. 7, with wind chills reaching minus 10 degrees.

Total Midcontinent demand is expected to climb from 28.74 Bcf/d to its highest values this winter season at 38.06 Bcf/d Feb. 7, which would be 12.2 Bcf higher than the five-year average, according to S&P Global Platts Analytics.

Heating demand in the Midcontinent is now projected to rise about 32% moving into the weekend to 27.84 Bcf/d Feb.7, almost 10 Bcf above levels a week ago, bringing bullish expectations to prices.

Colder temperatures and higher demand are not only forecast in the Midcontinent but across the US. This could mean reduced inflows from the Northeast moving forward as demand in the region is expected to hit around 36 Bcf/d Feb. 8 and the premium between Chicago and Dominion South could begin tightening.

A potential weakening between the two locations may mean lowered net flows into the Midcon Market from the Northeast, which have provided 6.9 Bcf/d of 10.9 Bcf/d net flows the past 30 days, while possible freeze-offs in the Rockies may also bring lower supply for the Midcontinent and upside risk for prices over the coming days.

The spread between Chicago city-gates and Henry Hub moved to 3 cents Feb. 4 from minus 6 cents the day prior, after having not reached a premium since November 2020. This positive spread may continue should colder temperatures and increased demand persist.

Power prices

PJM and MISO spot power prices rose in the week ended Feb. 5 as the powerful arctic front pushed power demand higher.

AD Hub on-peak for next-day delivery jumped double digits to price in the low $40s/MWh, rising to the highest levels since August 2020. PJM West Hub on-peak traded just below $40/MWh, up about $8 day on day. In Chicago area, NI Hub on-peak was valued in the lower $30s/MWh. These are the strongest prices for both packages since mid-December 2020.

With colder temperatures and strengthening natural gas prices so far this year, regional power packages rose, compared with 2020 levels. Over the last month, locational marginal prices have averaged in the mid to upper $20s/MWh, with PJM West Hub up about 24% and NI Hub and AD Hub average prices up about 15% year on year.

PJM total peakload demand is forecast to jump about 11% on Feb. 8 to 105.78 GW, the strongest demand forecast since Jan. 29, when the region also experienced cooler than average temperatures. Since the beginning of 2021, peakload demand in PJM has averaged about 6% above 2020 levels over the same timeframe.

In Midcontinent ISO, power prices also saw a significant boost day on day, as the Upper Midwest high temperatures are forecast to be 20 to 30 degrees below average with wind chills advisories and wind chill watches expected for much of the region, according to the weather service.

Indiana Hub on-peak jumped to its highest price since July 2020 to trade around $45/MWh. So far this year, the average price at the Indiana Hub rose about 17% compared with where it traded around the same time last year.

MISO peakload demand for Feb. 8 is forecast at 80.24 GW, pacing about 5% above the average peakload forecast seen so far this year and about 6% above the last year's average at the same time, according to the grid operator data.

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