The Arctic Cold Has Sent Natural Gas Prices Soaring in the USA

Historic Increase in Natural Gas Prices

Contracts nearing expiration have exceeded 6 dollars per million Btu for the first time since 2022. Last week, natural gas prices experienced a 70% increase, marking the largest weekly rise recorded since 1990.

Winter Conditions Affect Production

It is estimated that severe snowstorms across the country have taken approximately 10% of U.S. natural gas production offline. The frigid temperatures have strained the electrical grid and disrupted transportation connections, leading to the cancellation of thousands of flights.

Increase in Energy Demand

The largest power grid operator in the U.S. expects electricity usage to reach a record for the winter season due to the freezing weather. This situation has prompted power plants to take action to secure natural gas supply. Due to the impact of snowstorms on production, gas flow at liquefied natural gas export facilities has dropped to its lowest level in a year.

Changing Market Dynamics

Following Russia's invasion of Ukraine, the reduction in liquefied natural gas supplies from the U.S. has caused prices to reach their highest level since December 2022. Timera Energy analysts noted that “the volatility of U.S. natural gas prices will be a significant determinant of LNG market value and risk over the next 5 years.”

March futures contracts rose 11% to 3.997 dollars/million Btu, while February futures contracts also gained 19% in value.