Cold Weather Surge: Nymex Natural Gas Futures Reach 3-Week Peak

A major shift in the short-term weather outlook drove the largest single-day US gas futures increase in nearly four years Tuesday. From a three-month low, the February contract jumped 80.4¢, or 25.9% — the largest on a percentage basis since January 2022 — to $3.907 per million Btu after weather forecasts issued over the holiday weekend predicted Arctic air would descend over the eastern half of the Lower 48 through early February. “Cold weather risk became a reality,” Price Futures Group analyst Phil Flynn said. “After a big surge like this, it wouldn’t be surprising to see the market catch its breath for a few days. But just like we’ve seen before, there could be more gas in the tank.” According to National Weather Service forecasts issued Monday, below-normal temperatures are a near certainty over the populated mid-Atlantic and Northeast US regions from Jan. 25-29. And below-normal temperatures are likely to persist over the eastern half of the country from Jan. 27 through Feb. 2. The forecasts “pulled the entire front of the curve higher.” Gelber & Associates said. “Two-week [weather] model runs added over 200 billion cubic feet of implied demand versus Friday, and while the latest ensemble update has moderated slightly, it still keeps a materially colder pattern in place into early February, supporting the risk of very large withdrawals and keeping the market highly reactive to each incremental weather revision.” Meanwhile, US gas production remains stout at 109.5 Bcf/d, Gelber & Associates noted. “But the looming cold window keeps downside production risk front and center, leaving prompt pricing sensitive to any evidence of freeze-offs or renewed tightening as the cold peak approaches.”