U.S. natural gas futures soared to a six-week high on Wednesday, marking a record 57% rise over the past two trading sessions, on expectations that extreme cold weather will boost heating demand to near-record levels while also cutting output by freezing oil and gas wells.
After soaring about 26% on Tuesday, front-month gas futures for February delivery on the New York Mercantile Exchange (NYMEX) jumped 96.8 cents, or 24.8%, to settle at $4.875 per million British thermal units (mmBtu) on Wednesday, their highest close since December 8.
Those gains pushed the contract into technically overbought territory for the first time since early December as some traders were forced to cover short bets.
“The February contract’s… gain in two days… highlights the extent of short covering as speculators rebalance from the largest short position in 14 months,” analysts at consultancy EBW Analytics Group said in a note.
The price move also boosted historic or actual 30-day close-to-close futures volatility to 131.9%, the highest level since March 2022. Higher market volatility increases traders’ opportunities to profit in a shorter amount of time, but also carries greater risks.
Historic daily volatility hit a record high of 177.7% in February 2022 and an all-time low of 7.3% in June 1991. Volatility has averaged 93.5% so far this year, up from averages of 68.7% in 2025 and 72.4% over the past five years (2021-2025).
Share prices for the two biggest U.S. gas producers also soared, with Expand Energy jumping about 4% to a two-week high and EQT soaring about 6% to a five-week high.
Looking forward, the premium of futures for February over March rose to a record $1.36 per mmBtu, boosting the premium of the front-month over the second-month to its highest level since hitting a record $1.21 in February 2014.
SUPPLY AND DEMAND:
Financial firm LSEG said average gas output in the Lower 48 states has slid to 108.7 billion cubic feet per day (bcfd) so far in January, down from a monthly record high of 109.7 bcfd in December.
On a daily basis, output was on track to drop to a three-month low of 106.2 bcfd on Wednesday due mostly to reductions in North Dakota and Arkansas, according to LSEG data, down from a recent high of 108.9 bcfd on January 16 and an all-time daily high of 111.2 bcfd on December 21.
Analysts noted some of the output declines seen so far this week were due to freezing oil and gas wells, known in the energy industry as freeze-offs.
Meteorologists projected weather across the country would remain mostly colder than normal through February 5, with the most frigid days expected around January 24-27.
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 Tuesday.
With temperatures forecast to average just 21.8 degrees Fahrenheit (-5.7 Celsius) across the country on January 24 and expected to continue averaging in the low 20s F through January 26, LSEG projected total demand, including exports, would reach 178.4 bcfd on January 26. That demand forecast was higher than LSEG’s outlook on Tuesday. But that figure 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 have held at 18.5 bcfd so far in January, matching the monthly record high set in December.
(Reporting by Scott DiSavino; Editing by Kirsten Donovan and Paul Simao)