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US natural gas jumped by almost 20% as freezing weather swept across much of the country, boosting heating demand and disrupting supplies.
Front-month futures soared above $6 per million British thermal units for the first time since 2022. That followed a 70% rally last week, the biggest weekly advance in records going back to 1990.
The winter storm is estimated to have knocked offline almost 10% of US natural gas production, just as demand for the heating and power-plant fuel jumped. The big freeze has strained electricity grids and crippled transport links, grounding thousands of flights.
Traders are closely watching how long the disruption to US gas output will last as the storm sweeps in, and some were caught off guard by the scale of the disruptions in key export hubs such as Louisiana and Texas. Global gas markets have seen a volatile start of the year and a bigger impact than what’s already priced in could continue to send prices higher.
A massive winter storm reached the US Atlantic Coast on Sunday, bringing heavy snow and ice, straining power grids and grounding thousands of flights at levels not seen since the pandemic.
The largest US grid operator is pushing power plants to secure natural gas supplies through the week on expectations that frigid temperatures will drive electricity usage to a winter record. Gas flows to US liquefied natural gas export plants have dipped to the lowest in a year as the winter storm disrupts output.
Natural gas prices hit the highest since December 2022, when European demand for US liquefied supplies was booming after it lost supplies from Russia following the country’s invasion of Ukraine earlier in the year.
“US gas price volatility is set to become a much bigger driver of LNG market value and risk across the next five years,” Timera Energy analysts wrote in a note.
The impact on front-month prices is also being exacerbated because the February contract expires on Wednesday, leaving liquidity relatively thin. Open-interest was less than 25,000 contracts on Monday, compared with 340,000 contracts for March futures.
The March contract climbed as much as 11% to $3.997 per million Btu, while the one for February gained as much as 19%.
— With assistance from Dan Murtaugh
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