Historic Storm Upends Markets

Energy Markets Update

Editor’s Note:  Winter Storm Fern was notable for both its broad geographic reach and its concurrence with sustained, unusually cold temperatures. Despite these challenging conditions, the grid performed at a high level and responded reasonably well overall. Outages were relatively limited when compared with other severe winter weather events. That said, prices rose sharply and have remained elevated across many markets. Throughout the prolonged cold stretch, thermal generation played a critical role in backstopping the system and maintaining reliability.

Table of Contents

• Energy Market Update
• Fern's Deep Freeze Ignites Prices
• The LNG Wave: 2026
• GHG Protocol Ponders Big Changes

Weekly Natural Gas Inventories

Source: EIA, Veolia

Energy Market Update

• Winter Storm Fern sowed chaos throughout North American energy markets last week. The impacts of lingering cold temperatures in the Northeast continue to keep upward pressure on spot prices. We’ll expand on the full range of impacts Fern’s Deep Freeze Ignites Prices story below.
• NYMEX prompt month February 2026 surged to a 3-year high of $7.46/MMBtu. The price hike was supported by a perfect storm of production freeze-offs and short-term weather forecasts showing persistent freezing weather during bid week.
• Now a few days into February, both Punxsutawney Phil and Staten Island Chuck saw their shadows, predicting 6 more weeks of winter. This seems like a no-brainer for anyone living east of the Mississippi, rodents included.
• Despite the groundhogs seeing their shadows, traders still saw bears following last week’s bull sightings. The NYMEX strip for the balance of the year 2026 settled at $3.60/MMBTU yesterday, down 17% since the end of last week. The calendar strips for 2027 and 2028 have remained relatively stable through the chaos.
• The NOAA’s short-term outlook no longer shows persistent below-average temperatures along the east coast, and much of the midcontinent is projected to be unseasonably warm (see chart below).

Source: NOAA

• The EIA reported a 242 Bcf withdrawal from storage for the week of 1/23/26. While still ~5% above the 5-year average, analysts are projecting that this week’s report, covering the second half of Fern, will challenge the eye-popping record of 359 Bcf.
• US dry natural gas production dropped below 100 Bcf/d on January 25th due to production freeze-offs across the country, but has rebounded over the past week (see chart below). Total US LNG feedgas demand also took a sharp downturn, dropping to just over 12 Bcf/d.

• The United States officially left the Paris Climate Agreement for the second time. The current administration’s withdrawal from global climate governance is in line with actions on the domestic front to halt renewable generation projects.
• Japan suspended plans to restart the world’s largest nuclear power plant after an alarm sounded during startup last week. The plant initially closed after the 2011 Fukushima disaster, and its sluggish start could be a bellwether for other mothballed facilities that want to make a comeback.
• Deliveries of electricity via the New England Clean Energy Connect (NECEC) transmission line were temporarily halted on 1/25. A surge in power demand in Quebec due to sustained cold necessitated the suspension of exports. While Hydro-Quebec incurs penalties when it cannot provide power, the initial weeks of commercial operation have been troubling, marred by unpredictable flows and price impacts throughout New England.
• Golden Pass LNG is now expected to produce first LNG in early March 2026, with initial cargo exports likely in April. This marks another delay from earlier plans that aimed for startup by the end of 2025. Once fully online in 2027, it’s expected to consume up to 2.5 Bcf/d of natural gas, adding significantly to US LNG exports.
  
• A sneak peek at other developments we’ll cover in our next issue: PJM Governors issued a Statement of Principles, and the NY Governor’s office released its State of the State, both addressing future energy reliability plans.
  

Fern's Deep Freeze Ignites Prices

Winter Storm Fern created large-scale disruptions to natural gas supply transportation across the eastern half of the US. Heating demand increased by more than 45% above the 15-year average. Wellhead freeze-offs, occurring when temperatures are too cold to extract gas from active wells, approached record levels set during Winter Storm Uri in 2021. The combination of broad and extreme cold drove natural gas prices to three-year highs and sent shockwaves through US power markets, which strained to provide sufficient gas for generation while also meeting heating demand.

• Winter Storm Fern delivered a severe shock to U.S. energy markets, driving near-record natural gas freeze-offs, pipeline constraints, and extreme price volatility. Natural gas production losses peaked on Jan. 25, approaching the record set during Winter Storm Uri, totaling ~15-17% of total U.S. daily gas production. The intensity and southern reach of the cold directly impacted major producing regions and demand centers near Henry Hub. However, the most dramatic price impacts were realized across regional markets, particularly in the Northeast, reflecting constraints on delivering gas to these regions.
• National Picture: On January 25, U.S. dry gas production plummeted to 97.3 Bcf/day, a sharp drop from nearly 106 Bcf/d just two days prior. These supply losses were primarily driven by the Permian Basin, the Northeast, and the Haynesville Shale. Simultaneously, frigid temperatures drove heating demand to surge, with residential and commercial consumption reaching the fifth-highest level on record and pushing total U.S. gas demand to its third-highest ever. The culmination of massive freeze-offs, elevated domestic demand, and Henry Hub prices surpassing global LNG netbacks drove a material pullback in LNG exports. Gas intake at most U.S. LNG terminals declined 20-30% during the peak of the storm.

• Regional Impacts: Henry Hub spot prices surged by 260% to $30.54/Dth, and prompt-month futures rose roughly 30% while strong storage inventories helped insulate forward prices. The price impacts were far more acute in the Northeast, where gas markets saw triple-digit pricing, with Algonquin reaching an astonishing ~$160/Dth.

Source - S&P Global

• Regional pipeline constraints and Operational Flow Orders (OFOs) became the binding constraint during the event. Widespread OFOs were issued across interstate systems, including Columbia Gulf, NGPL, El Paso, Texas Gas, Tennessee Gas Pipeline, Texas Eastern, and Transco, to preserve system integrity amid freeze-offs and extreme load swings. Unlike curtailments tied to contract quantities, OFOs restrict all usage to typical daily levels, with penalties for non-compliance. Several OFOs are expected to remain in effect until temperatures moderate.
  

• The price response also spilled over into power markets. Winter Storm Fern drove electricity demand sharply higher and caused outages affecting nearly one million customers from Texas to Tennessee. In gas-dependent regions such as PJM and NYISO, hourly wholesale power prices surged above $1,000/MWh, while in ISONE prices nearly reached this threshold. In response, grid operators relaxed emissions limits and ramped coal generation to make 21% of the Lower-48 supply, echoing responses seen during prior extreme cold events. It is hard to argue with the importance of dispatchable thermal generation during prolonged cold events, a bullish prospect for long-term capacity prices.
• The real-time relationship between electricity prices and natural gas costs in certain U.S. markets is illustrated below, based on ISONE's 10-day trailing spot market data. In the chart, the black line representing Massachusetts electric hub prices closely tracks the spot market prices of natural gas on the Algonquin pipeline serving the region, demonstrating how power prices are directly correlated with movements in natural gas costs.
  Sources: Constellation, ISONE, S&P Global
  
• What set Winter Storm Fern apart was its intensity and unusually deep southern reach, with Arctic temperatures directly impacting major producing regions and demand centers near Henry Hub. The event reinforced a critical market lesson: during short, high-intensity cold snaps, deliverability and pipeline constraints - not storage adequacy - become the primary drivers of price volatility across both gas and power markets.

The LNG Wave: Surging Supply, Shifting Demand, and Softer Prices in 2026 

• Global LNG supply is poised for a major inflection in 2026, with output rising at its fastest pace since 2019. The IEA expects production to climb more than 7%, led overwhelmingly by North America, which will account for more than 85% of new supply. As we’ve detailed in earlier newsletters, the U.S. remains the growth engine as Plaquemines LNG, Corpus Christi Stage 3, and Golden Pass ramp up in 2026. Additional volumes from Canada, Mexico, Qatar, Australia, and Africa deepen global market connectivity and balance global gas markets.
  
  Source: IEA
• The surge in supply and shifting trade flows are easing market tightness and pressuring prices lower. European TTF and Asian JKM benchmarks could fall around 20% year-on-year to just under $9.5/MMBtu, while Henry Hub is expected to average near $3.70/MMBtu in 2026.
  
  Source: IEA
• Rising supply and softer prices are expected to lift global gas demand by nearly 2%, led by China and emerging Asian markets. Demand in North America is projected to remain flat, while Europe’s gas consumption falls by about 2% as renewables continue to displace gas in the power sector.
• Despite this overall decline in consumption, Europe is set to import a record volume of LNG in 2026 to refill storage, support exports to Ukraine, and advance its plan to phase out Russian gas by 2027. However, this transition is proving complex. Recent data from the Center for Research on Energy and Clean Air (CREA) shows that the EU remains the largest buyer of Russian LNG, accounting for nearly half of their LNG sales. France, Belgium, Spain and the Netherlands recently increased imports, highlighting Europe’s continued exposure to Russian gas despite sanctions. This reliance underscores the challenges Europe faces as it transitions  away from Russian supply.
• The unfolding LNG wave is set to have a central role in shaping global gas markets in the coming years, likely putting downward pressure on prices and improving liquidity as regional gas markets become increasingly interconnected, but it's no silver bullet. There remains a range of risk factors – including geopolitical tensions and weather impacts, causing price volatility. Close international co-operation between responsible producers and consumers remains Important to Reinforce the architecture for secure global gas supplies.
  
  

  GHG Protocol Ponders Big Changes

The Greenhouse Gas Protocol is the most widely adopted framework for corporate carbon accounting and emissions reporting. Major revisions to its Scope 2 guidance are currently under review, with the 60-day public consultation period closing this week. During this window, stakeholders (including Veolia) have been reviewing and submitting feedback on the proposed changes.

• The intent behind these revisions is clear and positive: to strengthen the integrity and accuracy of carbon accounting.

• The current dual-reporting structure, requiring both location-based and market-based accounting, remains intact. However, the revisions introduce significantly stricter requirements for the contractual instruments companies use to reduce their reported emissions under the market-based method.
• Let’s break down the major proposed changes:

• It's also important to convey that the GHG Protocol doesn't operate in a vacuum; it underpins several mandatory municipal and regional policies, including California's SB253, meaning these revisions will have far-reaching regulatory implications. And during a time when momentum for clean energy investment is already wavering in response to shifting federal policy, these proposed changes, which present  additional practical challenges, are concerning.
• The Scope 2 revisions are expected to be finalized in late 2027, followed by a phased implementation period from 2027 to 2030.
• Veolia will continue monitoring these developments closely and update our readers as the revised guidance evolves.

Market Data

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