Cold wave hits, U.S. natural gas prices soar 50% in two days, weekly surge set to break 34-year record

Driven by expectations of severe cold weather heightening concerns over supply and demand tensions, U.S. natural gas futures prices have soared to their highest level since 2022. As a key fuel for heating and power generation, natural gas faces potential supply disruption risks amid surging demand, triggering intense market volatility.

According to the latest outlook from the National Oceanic and Atmospheric Administration (NOAA), weather forecasts over the past few days indicate a significant drop in temperatures across the U.S. It is expected that two-thirds of the country are highly likely to experience below-normal temperatures.

Impacted by the cold wave, the near-month contract for natural gas surged by 13% at one point on Thursday, quoted at $5.502 per million British thermal units. Prior to this, the contract had accumulated an increase of more than 50% over the previous two trading days. This rapid increase could mark the largest single-week gain in natural gas prices in 34 years.

The market is concerned that extremely low temperatures may lead to "freeze-offs" in the U.S. South—where moisture in pipelines solidifies and blocks flow—thereby disrupting natural gas production and limiting supply, causing involuntary declines in output at a critical time. Meanwhile, as cold weather intensifies, natural gas consumption is expected to spike, accelerating inventory depletion.

This price surge not only affects the U.S. domestic market, but also shakes the global energy landscape. Due to the high dependence of European and Asian markets on U.S. liquefied natural gas (LNG) exports, any domestic production disruption in the U.S. could trigger a chain reaction for those regions.

Currently, both Europe and Asia are also battling cold waves. Stimulated by increased demand amid low temperatures, European natural gas futures prices have soared more than 18% in the past week.

At the same time, as a major energy importing country, Japan’s electricity prices hit a three-month high on Wednesday. This shows that during the winter peak demand period, global energy markets are generally facing supply shortages and upward price pressure.

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