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05 Feb 2021 | 23:21 UTC — New York
Highlights
Sub-zero temperatures forecast in Midwest, Canada
Winter Storm System to reach Midwest on Feb. 6
Cash prices for Feb. 6-8 flows of natural gas surged across the US on Feb. 5 as a major cold weather event is forecast to spike heating demand for gas and cause production freeze-offs.
Natural Gas Pipeline-Nicor was trading 50 cents higher on the day to settle to $3.43/MMBtu Feb. 5, its highest price since March 2019. Likewise, the cash price for NGPL-Midcontinent Pool jumped 47 cents on the day to settle to $3.34/MMBtu as temperatures in Chicago reach negative lows.
The National Weather Service announced that the winter storm system hitting the Northern Rockies will reach the Midwest later Saturday afternoon, bringing snowfall from Nebraska to Illinois. Chicago temperatures Feb. 7 are forecast to reach a low of minus 5 degrees, with a wind chill of minus 10.
Total Midcontinent demand is projected to reach its highest values this winter season at 38.06 Bcf/d Feb. 7, while heating demand in the Upper Midwest is expected to climb to 27.84 Bcf/d Sunday, a 32% increase over a two-day period. Supply into the region to meet this rising demand may falter as temperatures drop across the US, which could provide more upside risk for Midcontinent prices moving forward.
The Chicago city-gates march contract has already spiked 20 cents on the day to $2.97/MMBtu Feb. 4, while the summer strip average climbed 10 cents over the same period to reach $2.78/MMBtu.
Although the impending weather event was expected to have the greatest US impact on the Upper Midwest and Midcontinent, the average temperature in the Pacific Northwest was forecast by Platts Analytics and CustomWeather to drop 9 degrees to 37 F on Feb. 8 from 46 F on Feb. 5. The lower temperatures will likely drive gas demand higher, especially if paired with lower Canadian inflows. The impact was felt in regional spot gas prices in Feb. 5 trading, with pricing locations across the area up between 40-90 cents on the day. Northwest, Canadian border (Sumas) was trading 62 cents higher at $3.39/MMBtu.
The Canadian government forecast that western Canadian temperatures would fall to lower-than-average sub-zero temperatures throughout the weekend, which could lead to higher domestic gas consumption for heating and production freeze-offs.
Temperatures in Calgary were forecast to remain entirely below zero until Feb. 10, with Feb. 8 seeing a particularly cold high of negative 9 degrees Fahrenheit and low of negative 20 F. This is substantially lower than normal, with the region's average high and low for that day at 30.4 F and 9 F, respectively.
Spot AECO was trading 71 Canadian cents higher at C$3.96/MMBtu and Westcoast Station 2 was up 89 Canadian cents at C$3.93/MMBtu.
Active weather is set to continue over the next few days and bring plenty of winter weather hazards in North America. As 6 to 12 inches of snow could fall across localized regions surrounding the Great Lakes, this weather is responsible for light snow across the Interior Northeast and New England during the afternoon of Feb. 5. In addition, precipitation is expected to develop from the Gulf Coast to the southern Appalachians as a separate area of low pressure forms along the Gulf Coast on Feb. 6, potentially bringing more snow from Western North Carolina to coast New England, according to the US National Weather Service.
As freezing temperatures are expected to remain throughout the week, US Northeast spot gas prices saw a surge in prices across the board during Feb. 5 trading. Algonquin city-gates jumped $4.05 to settle to $11.47/MMBtu, while Iroquois Zone 2 rose $2.93 to settle to $9.91/MMBtu for Feb. 6-8 flows.
Total Northeast demand was forecast by Platts Analytics to jump roughly 7 Bcf/d to 37 Bcf/d Feb. 8, 7 Bcf/d higher than Feb. 5 levels at 30.2 Bcf/d. The bulk of the demand increase stemmed from res-commercial demand, jumping to 22.9 Bcf/d Feb. 8.
Despite the increase in demand, total Northeast supply is expected to remain at roughly 33.4 Bcf/d over the next eight- to 14-days, down from recent highs of above 34 Bcf/d. With Northeast demand reaching its highest levels this winter season this week at roughly 40 Bcf/d, lower supply has created a need to pull gas out of storage.
Dominion saw a record-breaking drawdown for the week-ended Jan. 29, and the US Energy Information Administration announced that natural gas inventories declined by 192 Bcf for the week-ended Jan. 29, 3 Bcf lower than the Platts Analytics survey but still higher than the five-year average draw of 146 Bcf.
Dominion South climbed above $3/MMBtu to settle to $3.18/MMBtu Feb. 5, the highest level seen since March 2019. Compared to this time last year, Appalachia prices were seen to be significantly lower.