Snow, ice storm promises late-winter rally for Midwest, Northeast gas markets

Another winter storm is promising to bring snow, ice and freezing temperatures to the US Midwest and Northeast this week likely offering a boost to gas demand and prices across the eastern third of the US.

In a short-range forecast published Feb. 23, the National Weather Service said that the latest storm system would bring a variety of winter hazards to the Southern Plains through the Ohio Valley from Feb. 23 to Feb. 24, later moving into the Mid-Atlantic and the Northeast from Feb. 24 to Feb. 25.

Population-weighted temperatures in the Midwest plunged to just 18 degrees Fahrenheit on Feb. 23 and are forecast to remain in the low-20s F over at least the next five days. In the Northeast, temperatures are forecast to fall to around freezing on Feb. 24 where they're expected to remain through the upcoming weekend, data from S&P Global Platts Analytics showed.

Across the US Midcontinent, strong heating demand associated with the storm is forecast to keep total in-region gas consumption at around 29 Bcf/d to 30 Bcf/d through Feb. 25 – up sharply from an average 25.4 Bcf/d month to date. In the Northeast, demand is expected to spike to 30 Bcf/d on Feb. 24 and remain around that level or higher through the weekend and into next week, current forecasts show. In February, total Northeast gas demand, excluding LNG imports, has averaged about 27 Bcf/d.

Spot, forwards prices

At the Chicago city-gate, spot gas prices are up over the past two days, gaining another 25 cents on Feb. 23 to trade around $4.75/MMBtu. At Transco Zone 6 New York, the cash market added over 80 cents on Feb. 23 also trading at close to $4.75/MMBtu, data from the Intercontinental Exchange showed.

Over the coming days and into the weekend, spot prices at both locations – and at other regional hubs – could come under additional upward pressure. Forwards markets appear to be anticipating more upside for prices at Transco Zone 6 where the balance-of-month gas contract has traded in the upper $7/MMBtu range since mid-February. Over the same period, Chicago's balmo forward contract has remained relatively stable in the upper-$4 range, S&P Global Platts M2MS forward data shows.

For the Midcontinent and the Northeast, the late-February storm could be this winter's last hurrah for the gas market. Over the past two winter seasons, total demand in both regions has remained comfortably below 30 Bcf/d during every day in March. In early March 2019, a rare, late-season storm pushed total demand in both the Midcontinent and the Northeast into the low 30 Bcf/d range over a four- to five-day period, historical data from Platts Analytics shows.