US natural gas futures plunge 26% after Arctic freeze as weather normalizes

Adds latest prices

By Scott DiSavino

NEW YORK, Feb 2 (Reuters) - U.S. natural gas futures plunged about 26% to a two-week low that nearly wiped out all of the gains seen since mid-January on forecasts for a big change in the weather from Arctic cold last week to near-normal levels through mid-February.

Gas futures for March delivery NGc1 on the New York Mercantile Exchange fell $1.117, or 25.7%, to settle at $3.237 per million British thermal units (mmBtu), their lowest close since January 16.

Gas futures soared 140% from January 20-28 as extreme cold boosted heating demand to near-record highs and cut output to a two-year low by freezing oil and gas wells, before dropping by 57% from January 29-February 2 as warmer weather thawed wells and boosted output.

Natural gas is "arguably the most volatile commodity contract on the planet," Bob Yawger, director of energy futures at Mizuho, said in a note.

Massive price changes in recent weeks boosted historic or actual 30-day close-to-close futures volatility to a record high for a third day in a row, reaching 257.2% on Monday.

Higher market volatility increases traders' opportunities to profit in a shorter amount of time, but also carries greater risks.

Also weighing on gas futures was a roughly 5% drop in oil prices CLc1, LCOc1 on Monday after U.S. President Donald Trump said Iran was "seriously talking" with Washington, signaling a de-escalation of tensions over the sanctioned OPEC member's nuclear programs. O/R

NEGATIVE PRICES IN TEXAS

In the cash market, average prices at the Waha Hub in the Permian Shale in West Texas fell into negative territory for the ninth time this year, as pipeline constraints trapped gas in the nation's biggest oil-producing basin.

Daily Waha prices first averaged below zero in 2019. They did so 17 times in 2019, six times in 2020, once in 2023, a record 49 times in 2024, and 39 times in 2025.

In other news, Devon Energy DVN.N and Coterra Energy CTRA.N said on Monday they agreed to merge in a $58 billion all-stock deal, to become a large-cap producer with a top position in the Permian Basin as the shale sector consolidates to cut costs and boost scale.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states rose to 106.6 billion cubic feet per day (bcfd) so far in February, up from 106.3 bcfd in January. That compares with a monthly record high of 109.7 bcfd in December.

After roughly 10 days of extreme cold, meteorologists projected weather across the country would remain mostly near normal through February 17. Temperatures in the U.S. Northeast, however, were still expected to remain below normal for at least another week.

LSEG projected average gas demand in the Lower 48 states, including exports, would fall from 159.3 bcfd this week to 147.1 bcfd next week. Those forecasts were higher than LSEG's outlook on Friday.

Analysts projected energy firms likely pulled so much gas out of storage to meet near-record demand during the Arctic blast last week that stockpiles would go from around 5% above normal for this time of year during the week ended January 23 to about 1% below normal during the week ended January 30. EIA/GAS NGAS/POLL

Average gas flows to the eight large U.S. LNG export plants rose to 18.4 bcfd so far in February, up from 17.8 bcfd in January. That compares with a monthly record high of 18.5 bcfd in December.

(Reporting by Scott DiSavino; Editing by David Gregorio)

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