Major Heat on Tap for Key Markets
A heatwave forecast for early next week across the East and Midwest is already adding volatility to natural gas and power pricing.
Hot weather is on the way for much of the country, but it’s the East and Midwest that are set to take the brunt of it early next week. Forecast models are calling for a sharp spike in cooling demand, with degree day projections suggesting both regions will be hotter than at any point last summer. Temperatures in major cities from Chicago to Washington, D.C., are expected to climb into the 90s, and with high humidity in the mix, it’s shaping up to be one of the most intense heat waves in recent memory.
The latest outlooks suggest that next week could see 3 of the hottest 10 days since 2014 in the Midwest and East measured by combined population-weighted cooling degree days.
This kind of setup is already making waves in the natural gas market. NYMEX futures have been pushing higher, with balance-of-summer contracts working on a breakout above $3.90 per MMBtu as of this morning. Contracts further out along the curve are also trading at multi-week—and in some cases, multi-year—highs. If the heat sticks around or intensifies, the bullish summer case may finally start to play out.
One of the biggest headlines tied to this pattern is PJM’s latest load forecast. The country's largest power market is now calling for around 155 gigawatts of peak demand on Monday. Even if it doesn’t quite get there, anything north of 150 GW is a big deal for the grid. Monday would almost certainly qualify as one of this summer’s five coincident peaks, with Tuesday and Wednesday also shaping up as contenders. If the current forecast holds, Monday would mark PJM’s highest peak demand in more than a decade—though still well short of the record 165 GW set in 2006.
Forward power pricing for June is already spiking across PJM and MISO, and next week’s real-time action could get messy if actual loads come in at or above expectations.
That kind of demand means natural gas–fired generation will be running near full tilt, and the risk of regional natural gas price volatility will rise accordingly. It should also slow the recent pace of storage injections, with generation demand quickly moving toward peak summer levels.
It’s a familiar recipe—heat, humidity, and a tight power market—but it’s hitting earlier and with more force than usual this year. For energy buyers, traders, and anyone watching the markets, next week is shaping up as a key inflection point. If the demand surge delivers, it could be just the spark needed to push prices out of their recent rut.