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Forwards recap: Cold weather, gas gains push term power markets higher

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Forwards recap: Cold weather, gas gains push term power markets higher

A combination of higher fueling costs, due to gains in the natural gas futures arena, and expectations of elevated heating demand owing to cold weather forecasts kept term power prices biased higher during the week ended Dec. 9.

In natural gas futures trading, impressive gains marked the front-month January 2017 contract's entry into the review week Dec. 5 as it added 21.8 cents to settle at $3.654/MMBtu with cold weather forecasts offering support. However, additional moves higher were prevented Dec. 6 with front-month gas easing by 1.9 cents to $3.635/MMBtu, which extended the next day Dec. 7 with a loss of 3.2 cents to $3.603/MMBtu as traders took into the account the possibility of a slowdown in withdrawals.

Reports of a 42-Bcf net injection during the week ended Dec. 2, which was marginally above consensus estimates but well below historical averages, provided some volatility as bulls and bears vied for control Dec. 8. Ultimately, bulls won the day and pushed January 2017 gas back to the positive side of the ledger to end the day at $3.695/MMBtu, adding 9.2 cents. Traders once again turned their attention to cold weather outlooks engulfing major heat-consuming regions Dec. 9 with front-month gas closing the review week at $3.746/MMBtu, higher by 5.1 cents. Overall, January 2017 gas increased 9.2 cents during the review week spanning Dec. 5-9.

Across major wholesale electricity markets, packages for January 2017 delivery were mixed to predominantly higher as values reflected greater heating demand implied by cold weather and elevated fueling costs signaled by an uptick in natural gas futures.

Term deals at NEPOOL-Mass saw the biggest gains during the week, with packages changing hands at $80.05 on Dec. 5 and $90.25 on Dec. 9, for a weekly premium of $10.20.

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Other eastern markets were mixed. Forward trading at PJM West was assessed at $53.18 on Dec. 5 and $59.29 on Dec. 9, up by $6.11 for the period, while January 2017 deals at New York Zone G noted a $2.32 decline with power exchanged at $80.97 on Dec. 5 and $78.65 on Dec. 9.

In the central U.S., term trading activity was mostly oriented to the upside. PJM Northern Illinois January 2017 was pegged at $42.04 on Dec. 5 and $48.12 on Dec. 9, gaining $6.08 for the week, while PJM AD hub saw January 2017 packages traded at $45.18 on Dec. 5 and $51.16 on Dec. 9, up $5.98 over the period. A week-on-week addition of $1.91 was noted at MISO Indiana where January 2017 power was priced at $47.26 on Dec. 5 and $49.17 on Dec. 9. In Texas, ERCOT North saw January 2017 parcels change hands at $32.93 on Dec. 5 and $33.85 on Dec. 9, increasing 92 cents for the week.

Along the West Coast, term packages were also pointed higher. In Mid-Columbia, January 2017 deals added $2.63 and were posted at $29.00 on Dec. 5 and $31.63 on Dec. 9, while term trades at Palo Verde noted a weekly increase of 51 cents with January power transacted at $32.12 on Dec. 5 and $32.63 on Dec. 9. South Path-15 also followed the trend with January 2017 power quoted at $39.61 on Dec. 5 and $40.02 on Dec. 9, up 41 cents week on week.

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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, natural gas and coal index prices, as well as forwards and futures, visit our Commodities Pages.