US Upper Midwest, New England gas markets tighten ahead of wintry blast

Wintry weather forecast for the Northern Great Lakes and New England in the first week of April could offer the region's gas markets much-needed support in the form of stronger heating and storage demand.

Beginning April 2, unseasonably cold air from southern Canada will begin making its way into parts of Wisconsin, Illinois, Indiana and Michigan bringing along isolated snowfall that's expected to develop into more widespread snowstorms overnight from April 2-3. Beyond midweek, colder air and snow will move eastward into Upstate New York and New England with snowfall totals expected to total anywhere from 3 inches to as much as 2-3 feet in isolated and mountainous areas, according to a forecast published by AccuWeather.

At the regional level, the Midcontinent population-weighted temperature will trend as much 8 degrees Fahrenheit below normal over the next several days and average about 2 degrees below normal over the next week. Combined residential-commercial, power and industrial gas demand across the Midcontinent will briefly climb to the low 19 Bcf/d range by midweek -- stronger than the average 18.6 Bcf/d recorded over the full month of March, according to data from S&P Global Commodity Insights.

Across the Northeast, colder weather will also plunge the daily population-weighted temperature to as much as 8 degrees below normal from April 4-6 with daily readings expected to average about 3 degrees below normal over the next week. Northeast demand, excluding LNG exports, will average over 22 Bcf/d from April 4-6 -- also outpacing the March average of about 20.7 Bcf/d, S&P Global data showed.

Prices

On April 1, spot gas prices in the Upper Midwest and New England were trading well above their most recent settlement levels. At the Chicago city-gates, the cash market was moving around $1.65/MMBtu -- up from around $1.49 at market close March 28. Prices at the Mich Con city-gate added just 5-6 cents on the day to trade around $1.68. In the Northeast, spot markets were up more sharply on the day, with the Algonquin city-gates adding about 30 cents to $1.90 and Transco Zone 6 New York gaining nearly 25 cents to around $1.74, data from Intercontinental Exchange and S&P Global showed.

Higher demand and stronger prices in the US' two largest winter heating markets could help tighten regional and US gas market fundamentals into early April, slowing the start of injection season.

Storage

For the week ended March 22, the US Energy Information Administration reported a net 36 Bcf withdrawal from US inventory, due in large part to sizeable drawdowns in the US Midwest and East regions. At 2.296 Tcf, US gas in storage is now at its lowest level yet this year but still 669 Bcf, or more than 41% above the five-year average for late March.

In the Midwest, stocks were estimated at 528 Bcf in the week to March 22 -- nearly 150 Bcf or almost 39% above average. In the East, stocks were estimated at 387 Bcf and were almost 80 Bcf or about 26% above the five-year average, data from EIA showed.

According to modeled estimates from S&P Global, stock levels may have fallen by nearly 25 Bcf in the Midwest and by over 30 Bcf in the East in the week to March 29. Assuming colder weather materializes through the first week of April, inventory levels in both regions could continue falling before milder, more spring-like weather arrives.