Midcontinent spot gas prices were under pressure in recent trading amid mild weather and flagging demand as upward trending temperatures promise more of the same until mid-month.
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Register NowSince late January, gas prices at the Chicago city-gate have tumbled, recently trading down to a six-week low at under $1.70/MMBtu. Over the past two weeks, prices there have averaged just $1.99, or almost 27 cents behind the US benchmark Henry Hub, down from just a 10-15 cents discount from mid- to late January. On Feb. 6, Chicago gas prices were moving around $1.80, or about 29 cents below Henry Hub, data from Intercontinental Exchange and S&P Global Commodity Insights showed.
Since late January, mild weather has weighed on the Midcontinent market as gas demand there ebbs. Over the past 14 days, the region's total gas burn has averaged just under 21.5 Bcf/d as temperatures trend at a balmy 40 Fahrenheit, or about 15 degrees above average.
Last month, total Midcontinent demand topped 42 Bcf/d, or its highest in nearly five years as frigid weather across the central US briefly plunged the region's population-weighted temperature to just 0 F, or almost 30 degrees below average. At the time, Chicago spot gas prices topped $30/MMBtu – dramatically outpacing the spike in Henry Hub cash prices to around $13, S&P Global data showed.
Weather, demand outlook
According to a short-range outlook from AccuWeather, high temperatures in Chicago will climb to the mid-50s F from Feb. 7-9 before falling back to more seasonally normal levels in the 30s by the week beginning Feb. 11. Similarly mild weather is expected in cities across the region, forecasts show.
At the regional level, population-weighted temperatures are projected to average about 15 degrees above normal over the next seven days and approach 50 F from Feb. 8-9, or about 25 degrees above normal. According to a demand outlook, total Midcontinent gas burn should fall to around 16.6 Bcf/d over the same 48-hour period to trend about 10 Bcf/d below average.
While balmy weather in the Midcontinent will likely continue to weigh on regional cash prices over the short term, forward traders are keeping a cautious eye on a two- to three-week temperature outlook predicting much colder weather for the region in second-half February. After rolling to the balance-of-month position, the February forward gas price at Chicago city-gate has averaged about $2.87/MMBtu –exactly where it settled most recently on Feb. 5, S&P Global Commodity Insights data showed.