US natgas futures climb 3% ahead of storage report, volatility hits record high

By Scott DiSavino

NEW YORK, Jan 29 (Reuters) - U.S. natural gas futures climbed about 3% on Thursday on forecasts for more demand over the next two weeks than previously expected and an increase in gas flows to liquefied natural gas $(LNG)$ export plants after an Arctic blast boosted the now expired February contract to a 40-month high amid record volatility.

Thursday's small price increase also came ahead of a federal storage report later in the day that is expected to show a bigger-than-usual withdrawal last week when the weather started turning colder than normal.

Analysts forecast energy firms pulled 232 billion cubic feet (bcf) of gas out of storage during the week ended January 23. That compares with a decline of 307 bcf during the same week last year and an average withdrawal of 208 bcf over the past five years (2021-2025). EIA/GAS NGAS/POLL

On its first day as the front-month, gas futures for March delivery NGc1 on the New York Mercantile Exchange rose 9.2 cents, or 2.5%, from where the March contract settled on Wednesday to $3.824 per million British thermal units (mmBtu). On Wednesday, when the February contract was still the front-month, the contract closed at its highest since September 2022.

Despite Thursday's increase, the contract was on track to drop about 49% from where the February contract closed when it was still the front-month, which would surpass the current all-time daily percentage decline of 31% in December 1995.

That daily percentage drop coupled with a record 140% increase over the prior seven days boosted historic or actual 30-day close-to-close futures volatility to a record 246.9%. Higher market volatility increases traders' opportunities to profit in a shorter amount of time, but also carries greater risks.

That topped the prior all-time daily volatility high of 177.7% in February 2022 and compares with an all-time low of 7.3% in June 1991. Volatility has averaged 114.0% so far this year, up from averages of 68.7% in 2025 and 72.4% over the past five years (2021-2025).

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states dropped to 106.2 billion cubic feet per day (bcfd) in January, down from a monthly record high of 109.7 bcfd in December.

Daily output, however, was on track to rise for a fourth day in a row to 103.5 bcfd on Thursday after collapsing to a two-year low of 92.5 bcfd on Sunday due mostly to freezing wells in Texas, Louisiana and Oklahoma, according to LSEG data. That compares with a recent high of 110.0 bcfd on January 12 and an all-time daily high of 111.2 bcfd on December 21.

Meteorologists projected weather across the country would remain mostly colder than normal through February 13, though not nearly as cold as the weekend of January 24-25.

LSEG projected average gas demand in the Lower 48 states, including exports, would fall from 169.6 bcfd this week to 157.5 bcfd next week. Those forecasts were higher than LSEG's outlook on Wednesday.

Average gas flows to the eight large U.S. LNG export plants fell to 17.7 bcfd so far in January, down from a monthly record high of 18.5 bcfd in December.

On a daily basis, however, LNG feedgas was on track to rise for a third day in a row to 18.5 bcfd on Thursday after dropping to a one-year low of 11.5 bcfd on Monday due to reductions at several plants during the winter storm, including at Freeport LNG in Texas and Elba Island in Georgia.

In other LNG news, some energy firms took the unusual step of importing gas into the U.S. this week to capture record-high prices during the Arctic blast.

(Reporting by Scott DiSavino; Editing by Kirsten Donovan)

((scott.disavino@thomsonreuters.com; +1 332 219 1922; Reuters Messaging: scott.disavino.thomsonreuters.com@reuters.net/))