US natgas futures soar 124% over six days during Arctic blast, Northeast cash prices hit record highs

By Scott DiSavino

NEW YORK, Jan 27 (Reuters) - U.S. natural gas futures soared by a record 124% over the past six days on Tuesday in volatile trade ahead of contract expiration on worries that extreme cold expected this week in the Northeast could keep some gas wells frozen until the weekend or beyond.

In the spot market, meanwhile, gas and power prices in the Northeast soared to record highs as the brutal freeze boosts heating demand and tests electric grids across the region.

On its second-to-last day as the front-month, gas futures for February delivery NGc1 on the New York Mercantile Exchange rose 15.4 cents, or 2.3%, to settle at $6.954 per million British thermal units (mmBtu), their highest close since December 2022 as the winter storm froze wells and cut output to a two-year low.

Energy analysts noted that the front-month was so volatile on Tuesday - down 15% and up 8% in intraday trade - because trading volume was low ahead of contract expiry.

Futures for March NGH26, which will soon be the front-month, were down about 2% to $3.81 per mmBtu.

In the cash market gas prices for Tuesday soared 242% at the Algonquin Hub NG-CG-BS-SNL in New England to a record $173 per million British thermal units (mmBtu), while next-day prices at the Eastern Gas hub NG-PCN-APP-SNL in Pennsylvania jumped 47% to a record $59.

In the power market, spot prices at the PJM West Hub E-PJWHRTP-IX in Pennsylvania and Maryland soared 146% to a record $1,014 per megawatt hour (MWh).

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states dropped to 106.3 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 rise to 93.5 bcfd on Tuesday after falling to two-year lows of 92.4 bcfd on Monday and 92.5 bcfd on Sunday, due mostly to freezing wells in Louisiana, Texas and North Dakota, 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.

That means output fell about 17.6 bcfd from January 13-26. In past winters, freezing wells, known as freeze-offs in the energy industry, have slashed gas output by massive amounts, including the loss of around 17.2 bcfd from January 8-16 in 2024, cuts of 15.8 bcfd from December 20-24 in 2022, and a drop of 20.4 bcfd from February 8-17 in 2021, according to LSEG data.

Meteorologists projected weather across the country would remain mostly colder than normal through February 11 -- 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 169.0 bcfd this week to 155.6 bcfd next week. The forecast for next week was higher than LSEG's outlook on Monday.

On a daily basis, LSEG said total demand reached 176.2 bcfd on January 26, which was lower than its 178.6 bcfd forecast earlier in the day and fell short of the Lower 48 daily all-time high of 181.2 bcfd set on January 21, 2025.

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, LNG feedgas was on track to rise to 13.7 bcfd on Tuesday after dropping to a one-year low of 11.6 bcfd on Monday due to reductions at several plants during the weekend winter storm, including Freeport LNG in Texas and Elba Island in Georgia.