February 2021 Winter Storm: Impact on 

Futures Markets

Division of Market Oversight & Division of Clearing and Risk

ENERGY AND ENVIRONMENTAL MARKETS 

ADVISORY COMMITTEE 

JUNE 3, 2021 MEETING
Disclaimer

The views expressed here represent those of CFTC staff and do not necessarily 

reflect the views of the Commodity Futures Trading Commission, any of the 

Commissioners, the Division of Market Oversight, the Division of Clearing and 

Risk, or other staff at the Commission.

Consistent with Section 8(a) of the CEA, this presentation does not contain data 

or information that would separately disclose the business transactions or 

market positions of any person, any trade secrets or names of customers. 

2
Overview

3

Source: DTN

Winter storm affected large part of the U.S.; Record cold temperatures in the 

Southwest
4

Natural Gas
Natural Gas Demand and Supply

Demand-supply imbalance met from storage withdrawals of more than 

300 bcf: second highest withdrawal ever (highest in January 2018)

5

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Feb-12 Feb-14 Feb-16 Feb-18

bcf

SouthWest

2020 2021

+54%

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

Feb-12 Feb-14 Feb-16 Feb-18

bcf

Lower 48

2020 2021

+24%

Natural Gas Demand

Source: Refinitiv Eikon

50,000

60,000

70,000

80,000

90,000

100,000

Feb-9 Feb-16 Feb-23

bcf

Lower 48

2021 2020

-16%

Source: Refinitiv Eikon

Natural Gas Production

Sharp increase in demand; largest monthly decline in production due to 

well freeze-offs
Natural Gas Prices

Sharp increase in spot gas prices; prices in excess of $1,000/MMBTU reported

6

Chicago 

Avg: $72

Peak: $130

ONEOK

Avg: $463

Peak: $1193

Waha

Avg: $113

Peak: $209

HSC

Avg: $193

Peak: $400

Henry Hub

Avg: $10

Peak: $24

Source: Platts

2.50

2.60

2.70

2.80

2.90

3.00

3.10

3.20

$/MMBTU

3.30

Feb-8 Feb-15 Feb-22

March NG Futures 

Source: Refinitiv Eikon

Futures prices relatively less volatile: active month was March with the delivery 

period two weeks out
7

Electricity
Electricity Markets: Texas

Background

• Texas electricity grid is relatively isolated from the rest of the U.S.; operated by 

Electricity Reliability Council of Texas (ERCOT), and regulated by Public Utility 

Commission of Texas (PUCT)

• “Energy-only” market; approximately half of generation from natural gas

8

Impact of storm

• Equipment failure due to 

inadequate weatherization

• Widespread outages; 

ERCOT implemented load 

shedding to prevent system 

collapse

• Net generation just above 

50% of installed capacity 

during peak of the storm

30,000

40,000

50,000

60,000

70,000

80,000

90,000

9-Feb 11-Feb 13-Feb 15-Feb 17-Feb 19-Feb 21-Feb

ERCOT Generation vs Installed Capacity

Demand Forecast Net Generation

Generation Capacity Planned Peak

MW

Source: EIA
Electricity Prices

9

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Feb-12 Feb-14 Feb-16 Feb-18 Feb-20

$/MWh

SPP South Hub Real-Time 

Prices

Source: SPP

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,

10,000

Feb-12 Feb-14 Feb-16 Feb-18 Feb-20

$/MWh

ERCOT North Real-Time 

Prices

000

Source: ERCOT

High demand, generation shortfall, and high price of natural gas led to high 

prices for electricity

High energy prices in ERCOT meant to compensate generators for variable and fixed 

costs; some retail contracts indexed to wholesale prices
ERCOT Futures

Futures cash settle to ERCOT prices; Significant increase in ERCOT daily 

futures volumes and open interest leading up to storm

10

0

5,000

10,000

15,000

20,000

ERCOT Daily Futures OI and Trade Volume

0

2,500

5,000

7,500

10,000

Feb-1 Feb-8 Feb-15 Feb-22

Source: CFTC

Commercial traders dominate contract open interest 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Long Short

Commercial Share 

of OI

Source: CFTC
ERCOT Price Adjustments

11

Re-pricing efforts eventually abandoned

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,0

10,000

Feb-12 Feb-14 Feb-16 Feb-18 Feb-20

$/MWh

ERCOT North Real-Time 

Prices

00

Source: ERCOT

PUCT Directives to ERCOT

• Feb 15, 5:30 pm: Set prices to cap of $9,000

during periods of load shedding; Price 

adjustments retroactive to morning of 2/15.

• Feb 16, 1:00 pm: Rescinded retroactive price 

changes: prices between 1:00 am and 5:30 pm on

2/15 restored to original levels of around $6,000.

Texas Legislature (through early March)

• Pressure by Texas legislature to retroactively

reduce prices to help consumers.

• ERCOT Independent Market Monitor report on 

March 4: $9,000 price cap applied incorrectly 

from Feb 18 – Feb 19, 9:00 am, since system 

was not load-shedding; total impact estimated at 

$16 billion within the ERCOT system.
Futures Markets: Potential Impacts

12

Potential Impact on Futures Markets

• ERCOT re-pricing efforts raised possibility of re-settling futures contracts.

• Daily and monthly contracts with notional value of several billion dollars 

could have been affected.

• By the time re-pricing efforts were abandoned, futures contracts had settled.

• Changes in the settlement price would have resulted in DCOs collecting 

variation margin from its members based on the new settlement price.

• Staff estimated the size of these pays and determined that several clearing 

members would have had very large pays, but not greater than pays they 

make regularly. 
Futures Markets: CFTC Actions

13

CFTC Actions

• Monitored developments at PUCT and Texas Legislature

Held regular discussions with DCOs, FCMs, and DCMs

–

•

Monitored customer and firm positions, margins and cashflows

– Identified clearing members and customers with exposure to re-pricing 

futures

– Verified all pays were made on time

– Ensured clearing members had adequate liquidity and capital

– Ensured clearing members were collecting from customers