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New cold front moves into US Northeast, Midwest with unequal effect on spot gas prices

Highlights

Northeast spot gas prices soar in Jan. 13 trading

Midwest spot gas prices register a tepid response

Another arctic cold front was forecast to push south from Canada into the Midwest and Northeast Jan. 14-16, which will likely boost gas demand in both regions.

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The pricing impact of the looming cold weather and higher gas demand will likely express itself differently in Northeast compared to the Midwest, due in large part to each region's gas sourcing options.

The National Weather Service forecast a "quick hitting winter storm" to reach the Midwest and Northeast over the next several days and into the weekend, which will drop temperatures across the two regions into the teens and 20s Fahrenheit.

The upcoming cold front follows several successive waves of very cold temperatures that have swept over the eastern half of the country so far this January.

Northeast dynamics

Cash gas prices in the Northeast saw a substantial rise in Jan. 13 trading, with some benchmarks rising above $20/MMBtu.

Algonquin, city-gates gained $5.94 to trade at $25/MMBtu for Jan. 14 flows, while Iroquois, Zone 2 moved $10.64 higher at $25.94/MMBtu, according to S&P Global Platts preliminary settlement data.

With limited pipeline connectivity to the rest of the country, New England draws on LNG imports on its highest demand days of the winter, exposing the region to buoyant global gas prices as it competes for cargoes.

Europe's Dutch TTF day-ahead price most recently settled at $24.31/MMBtu on Jan. 12, while the Japan Korea Marker's DES February price settled at $27.06/MMBtu.

S&P Global Platts Analytics data shows that LNG sendout from Everett regasification facility in Massachusetts has averaged 92 MMcf/d so far this month, with one day reaching as high as 333 MMcf. This is nearly double the 48 MMcf/d averaged in December.

Elsewhere in Northeast, prices were up across the board and trading in a range of $7-$13/MMBtu.

Transco, Zone 6 (NY) more than doubled day-on-day, trading $7.125 higher at $12.46/MMBtu, according to Platts preliminary settlement data.

The weather service forecast that the low temperature in Boston would plunge to 3 degrees F Jan. 14 after a low of 31 F Jan. 13. Boston temperatures were forecast to remain below freezing until Jan. 17, with a very cold Jan. 15 seeing a high of just 14 F.

Looking further south, New York City temperatures were also forecast to plunge over the next several days, with the Jan. 14-15 low expected to fall to 12 F from a low of 38 F Jan. 13.

Midwest dynamics

CustomWeather and Platts Analytics forecast that the average Midwest temperature will slide to 24 F on Jan. 14 from 31 F Jan. 13, and then into the high teens for Jan. 15-16.

The Midwest registered a decidedly lukewarm pricing response to the upcoming cold snap, with most spot gas prices trading within several cents of prior-day settlements.

Chicago, city-gates moved just 2 cents higher to $4.43/MMBtu at preliminary Jan. 13 settlement, while Northern, Ventura moved 6.50 cents higher to $4.425/MMBtu.

That said, the cold temperatures observed so far this January have already moved Midwest spot gas prices up to a higher range than that seen in the latter half of December, when prices traded in a range of $3.30-3.80/MMBtu.

One major limiting factor to a dramatic weather-related Midwest spot gas price rally is its ample pipeline connectivity to the Rockies, Midcontinent Producing Area, Appalachia, and most of all, Canada.

While month-to-date inflows into the Midwest from Canada have lagged year-ago levels, inflows have surged in recent days. Platts Analytics data shows that Canada-to-Midwest flows have increased 22% over the last seven days to 3.88 Bcf from 3.17 Bcf Jan. 7.

Near-term temperature forecasts for milder temperatures in Canada than those seen in the first week of January suggest that the current level of Canada-to-Midwest flows may continue through the upcoming weekend.

Outlook

The National Weather Service's six- to 10-day and eight- to 14-day outlooks show a likelihood of below-normal temperatures in the eastern half of the country continuing over the next two weeks.

Within that time period, CustomWeather and Platts Analytics daily forecasts show daily fluctuations in temperature that could contribute volatility to spot gas prices, especially in the Northeast.