US Cold Wave Forecast Drives Natural Gas Futures Prices Up 16%

by Oh Suyon

Published 31 Dec.2024 10:34(KST)

On the 30th (local time), natural gas futures prices in the United States surged as much as 24% intraday due to forecasts of severe cold in the U.S. East Coast region in January next year.

According to the New York Mercantile Exchange on the day, the February delivery natural gas futures price closed at $3.936 per million BTU, a 16% increase compared to the previous trading day's closing price.

US natural gas production facility. Photo by Getty Images, Yonhap News

Bloomberg reported that this is the largest daily increase since the start of futures trading for this commodity in 2012.

At one point during the day, natural gas prices rose to $4.2 per million BTU, a sharp 24% jump compared to the previous session.

The forecast of a cold wave hitting the entire U.S. East Coast and Midwest in January next year led to expectations of increased demand for heating natural gas.

The U.S. National Weather Service (NWS) predicted that temperatures in the eastern and central U.S. regions will be below average starting January next year. The weather forecasting service AccuWeather anticipated that cold air will form storm patterns, potentially bringing significant snowfall.

There are concerns that if the cold wave peaks, it could also affect natural gas supply. Analytics.AI, an analysis and trading firm, projected that some facilities may freeze due to the severe cold, and gas production could decrease especially in the Marcellus Shale region of Appalachia. John Kilduff, founder of Again Capital, told CNBC that freezing of natural gas due to the cold wave could disrupt production.

The impending expiration of the Russian natural gas supply agreement passing through Ukraine also appears to have influenced prices. Ukraine, which is at war with Russia, announced that it will not renew the transportation contract ending on the 31st and will halt the transportation of Russian gas to Europe starting January 1. Increased demand for U.S. liquefied natural gas (LNG) exports and the reduction of Russian gas supply could put upward pressure on global natural gas prices, analysts say.