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US Northeast spot gas prices, power prices spike amid lower-than-normal temperatures

New York — With the US Northeast cold snap forecast to deepen on Jan. 28, both gas and power prices were trading substantially higher on Jan. 27.

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US Northeast spot gas prices and power prices skyrocketed during Jan. 27 trading as total gas demand was predicted to have a roughly 4 Bcf/d increase on Jan. 28 and continue to rise through Jan. 31, with temperatures switching from above average to below average. 

Looking at natural gas markets, Algonquin city-gates jumped $4.92 to $9.69/MMBtu for Jan. 28 flows, while Iroquois Zone 2 zoomed past and rose $5.79 to $9.75/MMBtu on Jan. 27. 

In the forwards market, the remainder of Algonquin city-gates winter strip has seen continued strength over the past few days, trading at a basis of $1.53/MMBtu as of Jan. 26 settle, up from 88 cents just two days prior. 

Gas demand levels this week have reached the highest since December 2019 at roughly 34 Bcf/d and are expected to continue to rise over the next few days, topping off at 36 Bcf/d, according to S&P Global Platts Analytics. 

According to the US National Weather Service, the city of Boston was forecast to have a chance of snow showers and drop to a low of 10 degrees F on Jan. 28, adding upward pressure to heating demand in the region. 

Looking at the production region, Appalachia gas production has fallen off significantly from record-highs above 34 Bcf/d seen in early December, which may be supporting helping reduce pressure on prices in the production region. 

Despite the fall off in production and a spike in prices, we still see an Appalachian basis disconnect in terms of gas prices. However, Dominion South basis has seen strengthening over the past few days but still trading at a basis below 59 cents to Henry Hub. 

Power prices spike on weather

Power prices in the Northeast for Jan. 28 delivery soared as temperatures in the region trended down on winter weather. The US National Weather Service issued Winter Weather Advisories as snow accumulations reached 2-4 inches.

Mass Hub on-peak rose around $27.50 from the previous settlement to $77/MWh, a 46.8% increase from the highest prices it reached in January 2020, when it priced around $52.50/MWh.

Overall, prices in Mass Hub year-to-date have trended 33.8% higher than last-year levels at the same time, when prices averaged $29.50/MWh; prices so far have averaged $39.50/MWh.

New England Independent System Operator peakload demand also supported the double-digit increase in prices, with demand for Jan. 28 rising 2.9%, from 16.8 GW to 17.3 GW.

In the New York Independent System Operator, prices trended up across the board as temperatures in New York City trended down 7 degrees below average to 33 degrees Fahrenheit, according to CustomWeather.

NYISO Zone G climbed about $7.75 to trade around $42.25/MWh, and NYISO Zone J spiked about $14 to trade around $49.25/MWh.

NYISO demand was another basis of support for power prices, with day-ahead demand increasing 1.35% to 18.3 GW.

Despite the snow, hydropower generation in the region slid 6.4%, from 80.6 GW to 75.5 GW, and gas supply tumbled 16.5%, from 80.9 GW to 67.5 GW.

Nuclear outages in the Northeast also supported the increase in prices. In NYISO, nuclear generation declined 2.7% as nuclear plant Indian Point-2 went offline, according to the US Nuclear Regulatory Commission.

In the Ontario region, some nuclear units in the Independent Electricity System Operator also experienced outages, providing additional support as the increase in gas share may be needed for the generation stack, adding upward pressure to the already high gas prices with higher winter demand.