Natural gas prices soar as dangerous freeze takes hold across massive swath of the US
U.S. natural gas futures jumped more than 50% in two days, putting futures on track for their biggest weekly gain in more than three decades, as dangerously cold temperatures are set to take hold of a massive swath of the country.
A massive storm will descend on the U.S. starting Friday, plunging Texas into a deep freeze before threating to dump snow on New York City and Boston. The conditions bring the threat of disruptions to gas production as water freezes inside pipelines – a situation that proved disastrous for Texas in 2021, when gas supply outages during extreme cold contributed to a collapse of the state’s power grid.
Weather models turned much colder overnight for the eastern two-thirds of the U.S. through early February, signaling higher energy demand for heating, according to commercial forecaster Commodity Weather Group.
“This is shaping up to be the most impactful storm of the winter so far,” said Jonathan Porter, chief meteorologist at AccuWeather Inc.
Hedge funds turned more bearish on gas at the end of last week, leaving the market poised for a rally as traders rushed to close out those wagers after weather forecasts were revised. Algorithmic traders, who use computer models to bet on price moves, reached a maximum short position on Jan. 5, according to data from Bridgeton Research Group. The traders went from 100% short late Tuesday to 64% early Wednesday, Bridgeton said.
Surging gas prices spell trouble for U.S. consumers struggling with rising energy bills, which have become a liability for politicians including U.S. President Donald Trump. But they are a boon to U.S. gas producers, especially those that have not locked in prices for a large share of their planned output through financial hedges.
Gas futures for February delivery rose 22% to $4.759 per million British thermal units as of 12:03 p.m. in New York. They earlier advanced as much as 27%.
Top U.S. gas producers Expand Energy Corp. and EQT Corp. rose again Wednesday, climbing as much as 6.6% and 7.1%, respectively, as the broader equities market gained.
The blast of Arctic air is forecast to bring heavy snow and ice to more than 150 million people across two dozen states, with as much as two feet possible in parts of the Appalachians, according to AccuWeather. That region is home to the Marcellus, one of the largest U.S. gas-producing basins.
Frigid conditions are forecast for Texas this weekend, where key gas production sites are located and infrastructure is less hardened to cold weather, raising the chance of temporary outages and reduced shipments overseas. The U.S. is the world’s biggest exporter of liquefied natural gas, and supplies to export terminals now account for about 17% of the nation’s gas production.
The U.S. gas market is “trying to price in” production disruptions through Kansas, Oklahoma and as far south as the Permian basin in West Texas, Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc., said in a note to clients.
Contracts for nearer-term delivery also soared. Cash prices for the Henry Hub trading point in Louisiana – the benchmark for U.S. futures – for the balance of January surged above $11 per million British thermal units Wednesday morning from around $7 on Tuesday and under $4 at the end of last week, according to traders.
The weekend contract rose as high as $18 to $19 per million British thermal units, according to traders. While soaring Henry Hub prices could make U.S. LNG exports uneconomic, it is unclear whether the elevated weekend prices will be sustained. The volume of gas sent by pipeline to U.S. export plants was little changed on Wednesday, according to BloombergNEF, despite repairs to a conduit feeding Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana.
Cold weather is causing energy prices to surge across the globe. Japan’s power price rose to a three-month high on Wednesday and European gas futures have also soared. Markets are monitoring for a potential weakening of polar vortex winds, which keep extreme cold bottled up in the Arctic, that could bring more freezing temperatures.
Any U.S. output disruptions could affect Europe, which has become more reliant on U.S. cargoes since Russia cut most of its flows to the continent following its invasion of Ukraine. In Asia, where other LNG buyers are located, average temperatures are seen staying below normal through the weekend, according to Atmospheric G2.
European natural gas topped 40 euros per megawatt-hour on Wednesday for the first time since June, extending this year’s scorching rally to more than 40%, as traders grapple with concerns about unusually cold temperatures across the world.
Europe’s gas market has seen sharp swings in the past two weeks after fuel inventories saw rapid withdrawals, raising concerns about the region’s fragile supply balance and upending market sentiment.