U.S. natural gas prices rose nearly 20% as a winter storm swept across much of the country, increasing heating demand and interrupting supply.
Front-month futures surpassed $6 per million British thermal units on Tuesday, the highest level since 2022. The jump followed a 70% increase last week, marking the largest weekly gain since at least 1990.
The storm shut down close to 10% of U.S. natural gas production, while demand surged for heating and electricity. Severe weather has also strained power grids and disrupted transportation, including grounding thousands of flights.
Traders are monitoring the duration of output disruptions, particularly in major export regions like Louisiana and Texas. The volatility at the start of the year in global gas markets suggests prices could continue rising if supply constraints persist.
Gas deliveries to U.S. liquefied natural gas export terminals fell to a one-year low due to the storm. Demand remains high, with the largest U.S. power grid operator urging generators to secure gas supplies in anticipation of record winter electricity use.
Natural gas prices last reached these levels in December 2022, when European buyers increased imports of U.S. liquefied natural gas following supply losses from Russia after its February invasion of Ukraine.
“U.S. 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 price increase was also influenced by the upcoming expiration of the February futures contract on Wednesday, which contributed to reduced liquidity. Open interest stood at fewer than 25,000 contracts Monday, compared with 340,000 for the March contract.
March futures climbed as much as 11% to $3.997 per million Btu, while the February contract rose up to 19%.
