United States natural gas futures have surged dramatically, recording a 119 per cent increase over five days to hit a three-year peak on Monday. This surge follows an Arctic blast over the weekend, which significantly increased heating demand while simultaneously cutting production to a two-year low. The front-month gas futures for February delivery on the New York Mercantile Exchange jumped 29 per cent on Monday, settling at $US6.80 per million British thermal units. This puts the contract on track for its highest close since December 2022.
Energy traders attribute the price explosion to a combination of factors beyond heightened demand and reduced output. Some speculators holding short positions on February futures were compelled to buy back contracts at inflated prices before their expiry on January 28, further exacerbating the price surge. The severe winter storm is estimated to have taken approximately 12 per cent of US natural gas production offline.
According to ANZ, this disruption could impact US exports of liquified natural gas (LNG), with pipeline deliveries to export terminals declining to their lowest level in a year. This disruption coincides with rising consumption in parts of Europe and Asia, which are also experiencing persistently cold temperatures.
Notably, gas-fired power generation in Tokyo has surged to its highest level since March 2024, indicating a broader global increase in demand. The situation remains dynamic as markets adjust to these supply and demand pressures.
