U.S. natural gas futures soared 27% to a three-week high on Tuesday on forecasts for much colder weather and higher heating demand over the next two weeks than previously expected that forced some traders to cover short positions.
After falling to a 13-week low before the long Martin Luther King Jr. holiday weekend, front-month gas futures for February delivery on the New York Mercantile Exchange (NYMEX) jumped 82.9 cents, or 26.7%, to $3.932 per million British thermal units (mmBtu) on Tuesday.
That was the biggest daily percentage gain since prices soared by a record 46.5% on January 27, 2022. The price move, which put the contract on track for its highest close since December 30, also boosted historic or actual 30-day close-to-close futures volatility to 116.4%, its highest since April 2023. Traders noted that much of that futures price gain likely came as speculators covered massive short positions. Before the long holiday weekend when the weather forecasts turned much colder, speculators boosted their short bets in futures and options on the NYMEX to their highest since November 2024, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
Looking forward, the premium of the front-month over the second-month rose to 78 cents per mmBtu, its highest since February 2014, which boosted the premium of futures for February 2026 over March 2026 to a record high.
In the cash gas market, extreme cold in the Northeast region boosted next-day gas prices in New York by almost 200% to $11.76 per mmBtu, their highest since February 2025.
In Texas, meanwhile, next-day gas prices at the Waha Hub in the Permian Shale in West Texas remained in negative territory for a fifth day in a row for the eighth time this year as pipeline constraints trapped gas in the nation’s biggest oil-producing basin.
SUPPLY AND DEMAND
Financial firm LSEG said average gas output in the Lower 48 states slid to 108.8 billion cubic feet per day (bcfd) so far in January, down from a monthly record high of 109.7 bcfd in December.
Meteorologists projected weather across the country would remain mostly colder than normal through February 4 with the most frigid days expected around January 23-27.
LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 150.0 bcfd this week to 168.8 bcfd next week. Those forecasts were higher than LSEG’s outlook on Friday.
With temperatures forecast to average just 21.1 degrees Fahrenheit (-6.1 Celsius) across the country on January 24 and expected to keep averaging in the low 20s F through January 27, LSEG projected total demand, including exports, would reach 176.8 bcfd on January 26.
That would fall short of the Lower 48 daily demand record of 181.2 bcfd set on January 21, 2025, when temperatures across the country averaged just 19.4 F, according to LSEG data.
Average gas flows to the eight large U.S. LNG export plants held at 18.5 bcfd so far in January, matching the monthly record high set in December.
(Reporting by Scott DiSavino, Editing by Nick Zieminski)