Chicago Citygate Premiums Playing Possum Despite Polar Plunges

Following record-high storage reports through most of 2024, gas storage in the Midwest as of February 21^st now sits at a dumbfounding 6-Bcf deficit to the five-year minimum. And yet, despite the consistently cold weather, two polar storms, and the highest winter demand in years, Chicago Citygate (Chicago CG) basis has failed to see its typical premiums. Driven by last year’s storage overhang, Midwest premiums have only shown up late in the season, as enough gas in storage has been worked off to only recently necessitate stronger pricing.

Historically drawing consistent year-round premiums, Chicago’s pricing dynamics shifted in 2017, coinciding with a dramatic increase in gas production out of Appalachia, which introduced closer and cheaper molecules to the Midwest market. As a result, Chicago CG has since operated as a winter market, trading at a deficit in the summers, when demand is low, and drawing premiums in the winter, when residential/commercial (res/com) demand peaks and scarcity pricing kicks in.

However, despite receiving two major polar events, pricing has been tepid at best this year, with the first round of winter weather topping out at a measly ($0.06)/MMBtu on January 22^nd and the second round reaching an $0.80/MMBtu premium for four days in mid-February.

As mentioned above, these winter demand peaks were largely satisfied by gas that was already in storage within the region. Rewinding to last year, Winter ’23/’24 was, for the most part, mild across much of the Lower 48. The Midwest region then exited withdrawal season in 2024 at 512 Bcf, or 90 Bcf above the five-year average, as a result. Throughout almost the entirety of the subsequent injection season, the Midwest remained at the top end of the range, producing record-high storage totals.

However, this winter has flipped the script. Seeing the highest res/com demand since Winter ’18/’19, storage withdrawals in the Midwest have averaged 10 Bcf per week higher than the five-year average withdrawal rate. This has more than worked off last year’s storage surplus, with the Midwest sitting at a 113-Bcf deficit to the five-year average and a 6-Bcf deficit to the five-year minimum as of February 21^st.

However, with 2024’s storage surplus now worked off and industry sentiment trending toward a short market for 2025, BTU Analytics expects this winter’s lack of premiums to be an anomaly. As such, it is likely that premiums will return for subsequent winters, so long as storage does not reach record levels at the end of injection season yet again.

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