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Forwards recap: Heat sends ERCOT June values above $100; other term markets firm

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Forwards recap: Heat sends ERCOT June values above $100; other term markets firm

Editor's Note: Please be advised that S&P Global Market Intelligence will no longer publish daily articles on price trends in the U.S. natural gas, electricity and emissions markets beginning June 1, 2018. Pricing data for these energy markets will continue to be available on the Market Intelligence platform.

Term power markets across the U.S., especially those located in Texas, moved higher during the week ended May 25 as traders considered an increase in fueling costs implied by gains in natural gas futures and elevated demand signaled by weather forecasts.

In natural gas futures trading, the front-month June contract opened the review week May 21 with a modest loss owing to revised weather outlooks calling diminished demand and closed the session down 3.7 cents at $2.810/MMBtu. The downside was reversed the following day May 22 as another revision in forecasts calling for strong cooling demand, which may limit weekly additions to natural gas storage, helped lift the June contract by 9.8 cents to $2.908/MMBtu.

The expected slowdown in storage building worked to keep the June contract in shallow positive territory May 23 with front-month gas notching a 0.6-cent increase to $2.914/MMBtu. Despite reports of a 91-Bcf net injection during the week ended May 18, which was slightly higher than consensus estimates, the June contract ran the other way May 24 and shed 2.6 cents to $2.940/MMBtu. Fundamental uncertainty, however, provided no definitive direction for June gas, which closed the May 25 session down 0.1 cent at $2.939/MMBtu with options expiring. Overall, the front-month gas contract added 12.9 cents during the review week spanning May 21-25.

The combination of higher fueling costs driven by gains in gas futures coupled with elevated cooling demand associated with outlooks for warmer weather worked to pull up most term markets across the country over the review week.

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Encompassing the week's bullish sentiment and posting the biggest gains for the period were June deals at ERCOT North, which were valued at $67.69 on May 21 and $129.84 on May 25, rising roughly 92%.

Markets in the central U.S. also moved higher following supportive fundamentals. Prompt-month power prices at PJM Northern Illinois notched a 6% weekly gain and were pegged at $30.53 on May 21 and $32.28 on May 25. PJM AEP-Dayton saw June power quoted at $35.37 on May 21 and $37.02 on May 25, up by 5% week on week. MISO Indiana assessed June power at $34.32 on May 21 and $35.93 on May 25, also adding about 5% during the period.

Hubs along the West Coast also responded to increased fueling costs and stronger demand with gains. June power at South Path-15 was noted at $33.70 on May 21 and $36.48 on May 25, rising by 8% for the week. Prompt-month power at Mid-Columbia was pegged at $16.75 on May 21 and $17.75 on May 25, around 6% higher throughout the period. Palo Verde June notched a 1% weekly increase with power valued at $37.50 on May 21 and $37.87 on May 25.

Along the eastern seaboard, term markets managed to remain on the positive side of the ledger and leaned flat to higher. PJM West June was assessed at $34.32 on May 21 and $36.13 on May 25, adding 5% for the week. New York Zone G June was quoted at $32.27 on May 21 and $32.98 on May 25, around 2% higher for the period. Prompt-month power at the New England Mass hub gained around 1% for the week and was valued at $29.31 on May 21 and $29.63 on May 25.

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Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power and natural gas index prices, as well as forwards and futures, visit our Commodities pages.