Strong gas inflows, wind forecast cushion US Midwest spot gas prices against coldest day of winter

Despite forecasts for Jan. 26 to be the US Midwest's coldest day so far in the winter 2021-22 season, regional spot gas prices moved lower in Jan. 25 trading, amid an influx of gas supply and projected increase in wind generation.

Chicago city-gates fell 30 cents to $4.04/MMBtu, while Northern, demarc shed 75 cents to trade at $4.01/MMBtu, preliminary Platts settlement data shows.

The day's price declines brought spot gas prices across the Midwest into a tight range of $3.95-$4.10/MMBtu, substantially lower than the $4.30-$5.50/MMBtu observed during the most recent cold snap Jan. 20-21.

Coldest day of winter

The average Midwest temperature was forecast to drop to 6 degrees Fahrenheit on Jan. 26, which will be the region's lowest daily temperature since February 2021, data from S&P Global Platts Analytics and CustomWeather shows.

The National Weather Service forecast that Chicago would see a high of 10 F and a low of 7 F on Jan. 26, with wind chill values as low as minus 19 F, prompting a Hazardous Weather Outlook issuance for most of Illinois, Wisconsin, Minnesota and Michigan. The agency warned of bitterly cold wind chill values of minus 25 F to minus 45 F in parts of northeast Minnesota and northwest Wisconsin on Jan. 26.

The Midcontinent Independent System Operator projected its day-ahead Jan. 26 load to see a 3.7% surge to 96.9 GW from 93.3 GW, which boosted power prices in the MISO service area on the Intercontinental Exchange during Jan. 25 trading.

Indiana Hub real-time peak Jan. 25 intraday contract for HE 0800-2300 edged $18 higher to $66/MWh. The day-ahead peak contract for Jan. 26 jumped about $19.50 to trade around $76/MWh, and the day-ahead off-peak contract had around a $20.50 upswing to $55/MWh. The real-time off-peak contract followed closely, rising $25/MWh to $55/MWh.

Strong gas inflows, wind forecast

Regional spot gas prices went in the opposite direction of day-ahead power prices, likely due to higher inflows of gas easing the supply-demand crunch and forecasts for strong wind generation.

Platts Analytics data shows that inflows into the Midwest surged 1.4 Bcf, or 11%, on Jan. 25, to 14.54 Bcf, helping the region meet the elevated demand of Jan. 25-26.

Inflows from the Southeast saw the largest gains, jumping 718 MMcf, or 74%, to 1.69 Bcf on Jan. 25 Rockies-to-Midwest flows increased around 300 MMcf, or 64%, to 779 MMcf on Jan. 25, while inflows from the Midcontinent Producing Area rose approximately 350 MMcf/d, 12%, to 3.29 Bcf.

On the gas demand side, higher wind generation Jan. 26 could also cut into gas' share of the power generation stack.

Average hourly wind generation in the MISO footprint was forecast to jump 79% to a seven-day high of 16,070 MWh on Jan. 26, day-ahead forecasts from the operator show.

Wind generation in the MISO service area so far this January has dramatically outpaced year-ago levels, aided by new capacity additions. Month-to-date daily wind generation has averaged 323 GWh/d for Jan. 1-25, up 115 GWh/d, or 55%, from the same time in 2021.