A severe cold wave sweeping across much of the United States propelled a significant surge in natural gas futures prices on Tuesday. Weekend weather forecasts indicated temperatures would plunge far below seasonal norms, potentially triggering a sharp increase in demand for heating and power generation. A major winter storm is anticipated to bring substantial snow, freezing rain, and ice to the southern Rockies, Plains, and the US South by Friday, before advancing towards the East Coast over the weekend. This cold snap has reversed the previous trend of a mild winter. Earlier warm winter conditions, coupled with rising natural gas output from the Appalachia and Permian Basin regions, had driven prices down by nearly one-third from their peak in December last year. The front-month February natural gas contract on the New York Mercantile Exchange soared 24.1% to reach a yearly high of $3.853 per million British thermal units. Shares of natural gas producers broadly advanced: Comstock Resources climbed 5.2%, Expand Energy gained 4.7%, Range Resources rose 3.5%, Coterra Energy increased 3.3%, Antero Resources advanced 3.1%, and EQT added 1.7%. Eli Rubin of EBW Analytics noted in a report, "This shift to severe cold coincides with speculators holding short positions at a 14-month high, implying a risk of further price increases as shorts are forced to cover their positions." He added that sub-zero temperatures could threaten natural gas production in the Marcellus and Bakken shale regions, potentially causing output disruptions due to equipment freeze-offs. EBW also wrote, "However, market volatility will remain elevated. If weather models begin to indicate a warming trend by mid-February, the recent price surge could ultimately moderate."
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