Daily Market Update February 1, 2021
Early Morning Update
The Mar21 natural gas contract is trading up $0.21 at $2.77. The Mar21 crude oil contract is up $0.40 at $52.60.
Summary
As we start a new month, weather continues to be the main story in the energy markets. After seeing single digit lows in the Northeast late last week, upwards of 100 million people from Chicago to Boston are waking up to snow this morning. The storm, which has laid a wide swath of moderate snow totals across the Midwest, is now taking aim at the Northeast as a long-duration nor’easter with snowfall totaling 12-18”. As that storm moves out, another one follows Thursday/Friday, followed by a much-anticipated polar vortex making its first appearance this year in the continental U.S. With models showing a Midwest/Great Lakes emphasis of this cold air, areas like Chicago, Indianapolis, and Cleveland will likely see the coldest temperatures of the year. As in winters past, power and gas markets have reacted strongly to the news. Over the past 3 days, NYISO Zone J and NEPOOL NEMA day-ahead index prices averaged around $90/MWh – the highest so far this winter. On the gas side, with everything from the prompt month through next winter rallying, the price move reminds us that cold weather remains a fundamental market driver. If the colder-than-normal pattern sticks around through February, the market can expect price volatility in the forwards and higher index prices to be the norm.
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