Welcome to our guide to the energy and commodities powering the economy. Today, reporter Elizabeth Elkin explores the recent weather-driven rally for US natural gas.

Old Man Winter has finally yanked the US natural gas market from the ditch.

Record cold has been stoking demand for weeks, sending futures for the heating fuel soaring by about 135% above last year’s levels. Gas rose for seven straight trading days this month, topping $4 per million British thermal units and marking its longest winning streak since 2021.

Despite this week’s thawing temperatures, bulls have reason to believe the recent rally marks a fundamental turn for a commodity that spent most of last year trading below $3.50.

As millions of homes cranked up heaters, storage levels finally dipped below the five-year average for the first time since early 2023. That eliminates an overhang that’s kept prices depressed.

“Prolonged periods of cold weather to start the year, which was not expected as 2024 drew to a close, have driven gas energy demands to their highest level in years,” said Gary Cunningham, director of market research at Tradition Energy.

Even as winter ebbs, other consumption catalysts are around the corner.

The US Climate Prediction Center expects most of the nation to experience above-average temperatures this summer. That will drive demand for air conditioning and, by extension, electricity from gas-fired power plants.

Plus, US President Donald Trump vows to fast-track approvals for liquefied natural gas projects, opening the door for more foreign sales. Shell Plc raised its long-term outlook Tuesday.

All that has raised expectations for costlier gas in 2025. Earlier this month, the US Energy Information Administration raised its forecast for average prices by 20%. And last week, hedge funds extended their bullish bets to the highest in more than three years.

As always, risks remain.

The weather can defy the best of long-term forecasts. The Climate Prediction Center, after all, initially expected much of America to have above-average temperatures this winter.

Production is the other key variable. If companies start increasing US output to take advantage of higher prices, the rally could ease. But for now, Cunningham said it looks like they’re content to keep activity right about where it is.

That’s good for the bulls.

–Elizabeth Elkin, Bloomberg News