Houston—US Midwest power and natural gas spot prices increased in the week ended Jan. 27, as lower temperatures pushed demand higher.
PJM West Hub on-peak traded around $36.25/MWh, up almost $9 day on day and nearly $10 above the month-to-date average of $26.40/MWh. So far in January, PJM West Hub also trended 13% above year ago levels at the same time.In Chicago area, NI Hub on-peak traded just under $30/MWh, the highest price since mid-January.
With cold temperatures expected in the region, PJM total peakload demand is forecast to rise to 103.89 GW on Jan. 28. This would be the strongest demand projection since mid-December 2020. So far this year, demand in PJM has been trending 3% above January 2020.
In MISO, power prices followed suit, with Indiana Hub on-peak rising to about $32.50/MWh. The package traded 22% above the month-to-date average and 30% above the monthly average of January 2020.
MISO demand forecast has been steadily increasing over the last week to reach 80.40 GW on Jan. 28, one of its highest levels month-to-date. January MISO load has averaged 75.83 GW, mostly on par with the prior year's demand over the same timeframe.
Further ahead, the most recent US National Weather Service eight- to 14-day weather outlook calls for normal
Prices rise with colder weatherLooking towards the gas market, total Midcontinent demand, excluding outflows, reached their highest level since February 2020 at 28.82 Bcf/d Jan. 27 as temperatures in the region slid below normal. Upper Midwest temperatures dropped 11 F below the five-year average to about 16 F, pushing heating demand up 12% on the day to 19.68 Bcf/d, which is forecast to rise to 20.56 Bcf/d Jan. 28.
In response to the highest demand seen in the Midcontinent since February 2020, prices at Chicago city-gates have risen to $2.58/MMbtu, 81 cents above levels at this time last year and about 10 cents higher on the day.
The spread between Henry Hub and Chicago spot prices has tightened to a 5-cent premium Jan. 27 compared to a 14-cent premium last year and could continue to do tighten as temperatures are expected to drop once more Jan 28.
The rest of winter strip average for Chicago city-gates has also seen a 19-cent rise over the past two days to $2.56/MMbtu Jan. 27, gaining from increased February 2021 futures as demand rises and supply falters moving closer toward the end of January.
Cold weather has been appearing across the US, which could decrease inflows into the Upper Midwest as the Northeast and Midcontinent producing regions may hold onto gas to meet their rising demand. Net flows in the Midcon Market have been trending lower year on year with the month-to-date average sitting 1.58 Bcf below 2020 at 10.96 Bcf/d.
Most of the regions that provide the Upper Midwest with gas have been sending lower inflows on the year, except for West Canada, which has been sending about 1 Bcf/d more year on year, averaging 3.84 Bcf/d so far this month. This increase has helped slightly with weak Midcontinent production that has yet to see significant recovery from coronavirus impacts last year and continues to operate about 1 Bcf/d below 2020, according to Platts Analytics.
Bakken production could also see production disruptions due to potential freeze-offs in the region with temperatures falling below normal, according to the National Weather Service, which could increase the need for the Midon Market to rely more heavily on inventories.
Midcon Market storage levels reached 672 Bcf Jan. 27, about 2 Bcf above levels at this time last year, though earlier this month inventories briefly switched to being below last year levels before returning. However, with lower temperatures impacting Midcon Market demand over the next few days, there is increased opportunity for storage levels to fall below last year once more.
