Natural gas stocks are experiencing a breakout! During the early trading session on January 22, the energy sector performed exceptionally strongly, with natural gas concepts particularly eye-catching. Blue Flame Holdings surged vertically immediately after the market opened and hit the daily limit-up by 9:32 AM, while Victory Co. also hit a limit-up during the session. TORCH surged over 20% at one point, and Zhongtai Gas soared more than 15%. Large-cap stocks such as CNOOC, Sinopec, and PetroChina all posted solid gains.
European natural gas prices touched 40 euros per megawatt-hour for the first time since last June, with benchmark futures surging as much as 11.5% on Wednesday, pushing the robust year-to-date gains above 40%. Following a盘中 surge of over 28% in the previous trading session, the front-month U.S. natural gas futures contract surged more than 30% again during last night's session. NYMEX natural gas futures rose to $5, marking the first time since last December.
So, what exactly has happened? Energy Stocks Break Out As rising geopolitical uncertainty prompts investors to bet on higher oil prices, the U.S. energy sector, which has seen strong gains over the past few months, has climbed to a record high. Last night, the U.S. energy sector surged nearly 3%, with 49 stocks rising more than 5%. The S&P 500 Energy Index ultimately closed at 750.17 points, becoming the best-performing sector within the S&P 500. Recently, natural gas futures have also rallied consecutively, now breaking above $5, with gains exceeding 67% over the past week.
Bolstered by this, A-share natural gas concept stocks were active in today's early trading. The sector's gain reached 2.44%.
A Guofu Futures research report suggests that the shift in temperature expectations for mid-to-late January in Europe from mild to colder caused European gas prices to surge last week. After the spread between European and U.S. gas prices widened, the arbitrage window further opened. Furthermore, with nearly 10 million tons of U.S. LNG export capacity scheduled to commence operation in the first quarter, the rise in European gas prices has driven stronger expectations for U.S. export demand.
Additionally, since Russia significantly reduced pipeline gas supplies to Europe, Europe's reliance on U.S. LNG cargoes has noticeably increased. Moreover, the U.S. National Oceanic and Atmospheric Administration also lowered its end-of-month temperature forecast for the U.S. this week, with the eastern U.S. facing a widespread cold wave attack. Against the backdrop of strengthening domestic and external demand, U.S. gas prices are expected to fluctuate with a stronger bias in the short term.
Bloomberg Intelligence analyst Vincent Piazza stated, "Geopolitical pressures involving Venezuela, Ukraine, and Greenland are maintaining a moderate risk premium for oil prices. Among these, $60 per barrel for WTI crude is a key threshold."
Simultaneously, due to forecasts of an Arctic cold front affecting two-thirds of North America from this week into next, stocks of natural gas companies like EQT Energy, Expand Energy, and Coterra Energy have performed prominently this week. Vincent Piazza commented, "Despite rising natural gas production, cold weather in the eastern half of the U.S. should boost sentiment in the domestic natural gas market, while frigid temperatures in Europe will support seaborne natural gas benchmark prices."
How Will Energy Prices Evolve? Over the past year, the AI frenzy has overshadowed many traditional sectors, potentially causing investors to overlook some investment opportunities. The rally in oil and gas stocks accelerated noticeably in early December last year, after former President Trump promised to revitalize Venezuela's energy industry following the forceful capture of President Maduro in early 2026, a statement that pushed major oil producer stocks higher.
According to Investing.com, the recent strong performance of energy stocks marks a reversal in the sector's trend. In 2025, the index rose only 5%, significantly lagging the S&P 500's 16% gain, as it struggled to recover from the tariff shock. In the week after Trump announced large-scale tariffs on trade partners in early April last year, the sector fell 20%. It wasn't until the U.S. intervention in Venezuelan affairs on January 5 this year that the energy sector benchmark index recovered to its pre-tariff level from early April last year.
Due to an expanding geopolitical risk premium, Wall Street institutions have also become more positive on the oil price outlook. Citigroup recently raised its short-term baseline forecast for Brent crude to $70 per barrel. However, the largest cloud hanging over the industry remains the risk of an impending supply glut, which could cap crude oil prices.
The International Energy Agency's (IEA) upward revision of its 2026 oil demand forecast has also provided support for oil prices. WTI crude prices rose as much as 2.1% on Wednesday, though some gains were pared after Trump reiterated his desire for control over Greenland but stated he did not intend to use military force.
Barclays analyst Betty Jiang noted that although upstream oil companies' cash returns have remained robust amid recent macroeconomic volatility, they still face risks. "The oil market backdrop has become more complicated due to rising, and potentially unsustainable, geopolitical risk premiums."
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