Natural Gas News: Arctic Blast Drives 85% Weekly Rally Ahead of EIA Report

Feb Natural Gas Futures Surge 14% as Arctic Blast Threatens Supply Disruptions

U.S. natural gas futures are sharply higher for a third session on Thursday after taking out the December 5 main top at $5.022 overnight. The market is currently testing the March top at $5.551. A clean breakout over this potential resistance could trigger an acceleration into $6.095 to $6.255.

On the downside, the nearest support is the old top at $5.022, followed by the 200-day moving average at $4.251 and the 50-day moving average at $4.019.

At 12:01 GMT, February Natural Gas futures are trading $5.567, up $0.692 or +14.19%.

February Contract Outperforms March as Immediate Heating Demand Soars

February Natural Gas is the nearby futures contract, which is closer to the cash market, which explains why it is outperforming the March contract. This reflects immediate demand for natural gas, not deferred demand. This pattern is typically found in the winter because gas is being withdrawn from storage. Summer rallies are less common because heating demand during cold weather is more critical than cooling demand during hot weather.

According to the CME Group, “Winter rallies tend to be stronger because cold weather can cause sudden and large increases in consumption for heating, storage levels are drawn down rapidly, and any production or delivery constraints get magnified — all of which can push prices sharply higher in a short span. Summer demand for power generation, while important, typically grows more gradually and is less likely to trigger the same explosive moves.”

Week-to-Date Performance: February Up 85%, March Up 37%

March Natural Gas futures are trading $3.668, up $0.133 or +3.76%.

So far this week, February natural gas is up 84.77% and March is higher by 37.23%.

Arctic Weather Forecast Drives Supply Concerns Across 24 States

Natural gas prices are surging due to forecasts of Arctic weather intruding the U.S., boosting heating demand and potentially threatening disruptions to U.S. gas production as water freezes inside pipelines.

AccuWeather is saying that “a massive Arctic cold front will descend into the U.S. as far south as Texas, bringing below-normal temperatures to more than 150 million people across 24 states.” Additionally, the frigid conditions will increase the risk of temporary outages and reduced natural gas production.

EIA Storage Report Expected to Show 95 Bcf Drawdown Today

Later today at 15:30 GMT, the U.S. Energy Information Administration (EIA) will release its latest storage figures. The report is expected to show inventories declined by 95 bcf for the week-ended January 16. As of January 9, natural gas inventories were up 2.2% year over year and were 3.4% above their 5-year seasonal average, signaling ample natural gas supplies.

Short-Term Event-Driven Rally Expected; Watch February Expiration

Looking ahead, with February natural gas outperforming March, the market believes this will be a short-term event-driven rally. However, the Feb futures contract can continue to strengthen into next week’s expiration. A change in the weather forecast will also bring an end to this rally and the short-sellers will re-emerge.

More Information in our Economic Calendar.