US natgas futures soar over 20% for 2nd day as frigid weather boosts heating demand, freezes wells

By Scott DiSavino

NEW YORK, Jan 21 (Reuters) - U.S. natural gas futures jumped about 23% to a six-week high on Wednesday after soaring 26% on Tuesday on expectations extreme cold will boost heating demand to near-record levels while also cutting output by freezing oil and gas wells.

Front-month gas futures for February delivery NGc1 on the New York Mercantile Exchange (NYMEX) jumped 88.4 cents, or 22.6%, to $4.791 per million British thermal units (mmBtu), putting the contract on track for its highest close since December 8.

That put the contract on track to soar about 54% over the past two days, its biggest two-day gain since prices jumped 55% on January 27, 2022. Those gains pushed the contract into technically overbought territory for the first time since early December as some traders were forced to cover short bets.

The price move also boosted historic or actual 30-day close-to-close futures volatility to 126.7%, its highest since March 2022. Higher market volatility increases traders' opportunities to profit in a shorter amount of time, but also carries greater risks.

Historic daily volatility hit a record high of 177.7% in February 2022 and an all-time low of 7.3% in June 1991. Volatility has averaged 93.5% so far this year, up from averages of 68.7% in 2025 and 72.4% over the past five years (2021-2025).

As traders exploit those market opportunities, daily front-month volume reached 410,520 contracts on Tuesday, the third highest on record behind 415,930 on January 12, 2018 and a daily all-time high of 459,200 on November 14, 2018. That compares with daily averages of around 159,000 in 2025 and 136,000 over the past five years (2021-2025).

Looking forward, the premium of futures for February over March NGG26-H26 rose to a record $1.18 per mmBtu, boosting the premium of the front-month over the second-month NGc1-NGc2 to its highest since hitting a record $1.21 in February 2014.

SUPPLY AND DEMAND:

Financial firm LSEG said average gas output in the Lower 48 states slid to 108.7 billion cubic feet per day (bcfd) so far in January, down from a monthly record high of 109.7 bcfd in December.

On a daily basis, output was on track to drop to a three-month low of 106.2 bcfd on Wednesday due mostly to reductions in North Dakota and Arkansas, according to LSEG data, down from a recent high of 108.9 bcfd on January 16 and an all-time daily high of 111.2 bcfd on December 21.

Analysts noted some of the output declines seen so far this week were due to freezing oil and gas wells, known in the energy industry as freeze-offs.

Meteorologists projected weather across the country would remain mostly colder than normal through February 5, with the most frigid days expected around January 24-27.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 150.0 bcfd this week to 168.8 bcfd next week. Those forecasts were higher than LSEG's outlook on Tuesday.

With temperatures forecast to average just 21.8 degrees Fahrenheit (-5.7 Celsius) across the country on January 24 and expected to continue averaging in the low 20s F through January 26, LSEG projected total demand, including exports, would reach 178.4 bcfd on January 26. That demand forecast was higher than LSEG's outlook on Tuesday.

But, that would fall short of the Lower 48 daily demand record of 181.2 bcfd set on January 21, 2025, when temperatures across the country averaged just 19.4 F, according to LSEG data.

Average gas flows to the eight large U.S. LNG export plants held at 18.5 bcfd so far in January, matching the monthly record high set in December.