Wintry weather promises more gas market volatility for Upper Midwest, Northeast

Gas prices across the US Great Lakes and the Northeast are in for more volatility over the next several days as a winter storm now centered over southern Canada promises to bring artic air and snow to the region.

In Dec. 3 trading, cash prices at Transco Zone 6 New York, Iroquois Zone 2 and Mich Con city-gate retreated from recent highs recorded ahead of and immediately after the US Thanksgiving Holiday weekend. In the New York metro area, gas prices Dec. 3 were moving around $2.80-$2.90/MMBtu – down from the mid-$4s in prior-day trading. At Iroquois Zone 2, prices were down even more sharply to around $4.55, compared with a prior-day settlement just shy of $11.50. At the Mich Con city-gate, gas prices were off by less than 5% on the day to around $2.64 compared with $2.77 on Dec. 2, data from S&P Global Commodity Insights showed.

With a winter storm in Canada now targeting the region, though, prices may see another mid-week rally.

According to a Dec. 3 forecast published by AccuWeather, overnight temperatures in Milwaukee will plunge into the teens and low 20s over the next several days as artic air and snow move across the region. Similar, although slightly milder conditions are forecast for Detroit and even Pittsburgh. Further east in the New York and Boston metro-areas, temperatures will only dip below freezing briefly with a limited chance for snow.

Despite milder conditions along the coast, temperatures at the regional level will also plunge. For the Midcontinent, the weighted average will hit 23 Fahrenheit on Dec. 5, or about 13 degrees below normal. In the Northeast, the regional average drops to 30 F on Dec. 6, or 11 degrees below normal.

Demand

After a relatively disappointing start to the US heating season, both the Midwest and the Northeast witnessed a major surge in residential-commercial heating demand over the Thanksgiving holiday. Following a modest dip more recently, demand in both regions is expected to surge again.

In the Midcontinent, res-comm demand is forecast to reach 15.9 Bcf/d Dec. 5, up from a projected 13.5 Bcf/d on Dec. 4. In the Northeast, heating demand is expected to top 17.5 Bcf/d Dec. 6, rebounding from a projected drop to about 15.1 Bcf/d just one day prior, data from Commodity Insights showed. In both regions, demand is projected to fall just short of seasonal highs recorded over the past weekend.

Forwards

The recent arrival of more winter-like weather in the Upper Midwest and the Northeast has already significantly boosted the outlook for December gas prices in the region.

At the Mich Con city-gate, the December gas contract rolled off the board at over $3 Nov. 26, up from around $2.30-$2.40 in early November. As the balance-of-month, December prices there settled most recently at about $2.65/MMBtu. At Transco Zone 6 New York, the December gas contract gained about $1 from early to late-November to expire just below $4.40. As the balmo price, December gas has continued to trade above $4. At the Boston's Algonquin city-gates, the December gas contract climbed to around $9 by the time of its expiration, up from the mid-$6 in early November. December gas at Algonquin settled most recently at nearly $8.60 on Dec. 2, according to M2Ms forwards data from Platts, part of S&P Global Commodity Insights.