This week, Mother Nature delivered a (cold, not warm) welcome to winter to much of the country as the entire eastern half of the US received a blast of cold air.  The cold started in the Midwest over the weekend and spread outward to peak just a couple of days ago on Tuesday.  Parts of Pennsylvania and Vermont saw over 8 inches of snow and way down south in Jacksonville, Florida the temperature reached an all-time daily low of 28 degrees.  While most of the affected areas have warmed back up and look to be back on a warmer trajectory, the event marked a shift in the expected pattern for the Northeast, where it doesn’t look so ready to return to the previous norm.  The figure below plots daily HDDs across the East by region, with the past 30 days of actual temperatures included to the left and the forecast for the coming 15 days on the right.  The Southeast saw its blast of cold, pushing up to 20 HDDs on the 11^th and is now dropping back down to almost zero.  But the further north you move up the map, the more the cold is expected to stick around.  In New England, HDDs moving forward are expected to stay firmly above 20, and return to 25 by tomorrow, just 3 degrees short of the Tuesday peak.

Figure 1 | East HDDs, Last 30 Days and Forecast 

The New England market is of particular interest during the cold weather months when it comes to how natural gas demand plays out in the daily balancing.  On the Algonquin Pipeline there is a limited flow of gas molecules, and when the weather grows cold we see a pattern where rising rescom heating demand can begin to “crowd out” power burn, as the scarce molecules need to be allocated to heating, leaving less available for the regions gas-fired power generation.  We’ve written extensively about this phenomenon in the past (including in our recent NG Northeast and Northeast Power market flashes), often terming it the “battle for molecules”.  Looking back over the past several years, we can see a consistent pattern, an inflection point right around 35 degrees for the Boston daily average temperature, below which we see power burns start to fall of sharply.  You can see this play out on the figure below, which plots daily AGT rescom and power burn demand against the Boston temperature.

Figure 2 | Algonquin Pipeline Daily Rescom and Power Burn Demand vs. Boston Daily Average Temperature 

This week provided the first test of the AGT pipeline this winter, with the temperature dropping to sit just above the 35-degree inflection point.  Even so, we can see that rescom rose significantly between the 10^th and the 11^th as the temperatures fell by 18 degrees, from 0.8 BCF to 1.1 BCF.  At the same time, power burns just started to show a drop-off in demand, from 0.5 to 0.46 BCF.  The coming days should keep heating demand in play while just skirting the line before power burns start to be impacted.  The region awaits another delivery of cold from Mother Nature to push things over the edge.

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