(Photo credit: Level 5)
Feb 25, 2025
This winter has been demonstrably colder than the winter of 2023-2024 (Figure 1).
Figure 1. Comparison of 2024 and 2025 average winter temperatures (Credit: 5 Zoltars)
The colder weather coupled with a tight natural gas market have driven up electricity and natural gas futures.
Figure 2. ERCOT North forward curve, February 2025 through February 2027 (Credit: Level 5)
February 2025 average spot prices are approaching $39/MWh, the highest prices we’ve seen since September 2023 and 15% higher than last month (Figure 3).
Figure 3. ERCOT North monthly average spot prices, February 2024 - February 2025 (Credit: Level 5)
ERCOT North futures are backwardated with near-term priced around $53/MWh and outer years falling below $50/MWh (Figure 4).
Figure 4. ERCOT North annualized futures compared to a 12-month range, as of February 25, 2025 (Credit: Level 5)
The backwardated curve tells a different story compared to early November 2024 when prices were rising through 2027 and clustered around $44/MWh (Figure 5).
Figure 5. ERCOT North annualized futures compared to a 12-month range, as of November 4, 2024 (Credit: Level 5)
Natural gas storage is 5% below the five year average and 15% below last year’s storage level. This is primarily driven by a colder winter and tight natural gas market (Figure 6).
Figure 6. EIA total natural gas in storage for week ending 2/14/2025 (Credit: 5 Zoltars)
Not surprisingly, near-term natural gas futures have risen significantly with comparatively better values available on the back half of the curve (Figure 7).
Figure 7. NYMEX Henry Hub forward curve, as of February 23, 2025 (Credit: Level 5)
The National Weather Services’ near-term and seasonal outlooks predict temperatures at or above normal for the majority of the U.S. (Figures 9, 10, and 11). These predictions will likely exert a bearish influence on U.S. natural gas and power prices.
Figure 8. NOAA 6-10 Day Temperature Outlook, as of February 25, 2025 (Credit: National Weather Service Climate Prediction Center)
Figure 9. NOAA 8-14 Day Temperature Outlook, as of February 25, 2025 (Credit: National Weather Service Climate Prediction Center)
Figure 10. NOAA Seasonal Temperature Outlook, as of February 25, 2025 (Credit: National Weather Service Climate Prediction Center)
Zac Coventry specializes in energy portfolio management for large loads. He helps data center operators, energy managers, and private equity investors minimize CapEx and operational costs through supply chain management, energy brokerage, and strategic advising.
For a private consultation, please contact me.
