Record-Breaking Cold Blast in U.S. Will Roil Power Markets Next Week

(Bloomberg) -- A strong, late-winter cold blast is roiling power and natural gas markets across the U.S. and is set to wreak more havoc on Monday as temperatures may plunge to record lows for this time of year.

The forecasts have already prompted the operator of the electricity grid stretching from the Dakotas to Louisiana to issue a warning about potential power-plant fuel restrictions Monday through Wednesday. In Wyoming, gas supplies were expected to be so tight that a pipeline operator warned of constraints. Power for delivery Monday in the Pacific Northwest jumped to the highest in more than a decade, and heating demand may surge to March records.

“It should be a very interesting start to the week,” said Dan Grunwald, an energy analyst at Morningstar Inc.

The cold set to rush across much of the U.S. over the weekend is expected to linger through the middle of next week, offering a potential boost to power and gas markets at a time when demand for the fuels is usually tapering off. Lows could plunge below zero degrees Fahrenheit (minus-18 Celsius) in the upper Midwest. Single-digit highs will numb Minneapolis, and Chicago is forecast to be in the teens.

“This is a real significant chunk of cold air that has broken out of Canada,” said Richard Bann, a forecaster at the U.S. Weather Prediction Center. “I wouldn't be surprised if there are some daily record-low temperatures.”

Power for delivery Monday in the Pacific Northwest jumped to more than $890 per megawatt-hour, according to Intercontinental Exchange Inc. data. Gas for delivery this weekend in Sumas, Washington, near the Canadian border, surged to $200, the highest spot price recorded in the U.S.

On Friday, spot gas at Northern Natural Gas's Ventura hub in Iowa more than quadrupled to $13.50 per million British thermal units in trading on the Intercontinental Exchange, according to David Hoy, an energy trader with Dynasty Power Inc. in Calgary. “This is unprecedented,” he said.

Suppliers will have to pull natural gas out of storage to meet heating needs at an unusually high rate for this late in the season, said Rick Margolin, senior natural gas analyst at Genscape Inc.

“Even though latest weather forecasts have revised ever so slightly warmer, they're still showing enough cold to generate demand levels that could set new highs for the month of March,” Margolin said. Withdrawals could reach 120 billion cubic feet per day Monday. Demand may dip by the end of the week, but “we still see notably higher-than-normal levels running well into the middle of the month,” he said.

The Midwest grid operator will probably need to import supplies from neighbors to the East and West -- and possibly from Canada -- to meet demand, said Wade Schauer, an analyst at Wood Mackenzie. Over the weekend, there won't be much wind power in the region, but that should pick up by Monday.

“This one won't be quite as cold as the polar vortex in late January,” Schauer said. “But wind power supplies could have a big impact.”

To contact the reporters on this story: Christopher Martin in New York at cmartin11@bloomberg.net;Naureen S. Malik in New York at nmalik28@bloomberg.net;Brian K. Sullivan in Boston at bsullivan10@bloomberg.net

To contact the editors responsible for this story: Lynn Doan at ldoan6@bloomberg.net, Joe Ryan

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