US Natural Gas Hits Three-Year High in Surge as Contract Expires
(Bloomberg) -- US natural gas futures jumped on Wednesday shortly before the February contract expired, reversing earlier losses and extending a historic rally after a powerful winter storm disrupted production and boosted heating demand.
The February futures contract increased just before 2 p.m. in New York after being down the entire trading day, rising as much as 11.6% before settling at $7.460 per million Btu, the highest intraday price and settlement since 2022, respectively.
Still, the extent and timing of the surge was unusual.
“This has been unique, to say the least,” said Darrell Fletcher, managing director of commodities at Bannockburn Capital Markets.
The more actively traded March contract closed down 2.3% to $3.732 per million Btu in an unusually volatile trading session that sent prices as low as $3.579 per million Btu in early Asian trading.
Weather forecasts for the weeks ahead were somewhat mixed, shifting slightly colder in the eastern US for the first week of February while trending slightly warmer in the northern US the following week, according to the private forecaster Commodity Weather Group.
Gas inventories last week probably fell 239 billion cubic feet, based on median analyst estimates compiled by Bloomberg. That would be larger than the five-year-average withdrawal of 208 billion cubic feet for the week ended Jan. 23, and would leave inventories at 5.4% higher than the five-year average, according to the US Energy Information Administration. EIA reports weekly storage data at 10:30 a.m. New York time Thursday.
US gas production was up by 2.5% to 102.1 billion cubic feet per day on Wednesday, as output that was interrupted by freezing pipelines and power losses to equipment during the storm pushed more than 15% of production offline over the weekend, according to BloombergNEF data.
Gas jumped more than 124% in the six days through Tuesday, the biggest increase in data back to 1990, after traders and forecasters were caught off guard by widespread cold. Power prices in New York City and other major population centers also soared to record highs.
Frantic trading was exacerbated Tuesday by a glitch on the New York Mercantile Exchange, which hosts the most-active US gas contract. A circuit breaker tripped on the February contract during the settlement window, according to a spokesperson for CME Group Inc., which runs the exchange. The halt in trading lasted two minutes instead of the usual five seconds because of a technical issue, which has since been resolved, the spokesperson said.
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