By Myra P. Saefong
Consumers don't yet have to worry about the three-session 62% spike in prices
U.S. consumers might not have to worry just yet about the sudden rise in natural-gas prices.
The arctic blast that's expected to affect 230 million people across the United States could lead to a potential shortage in natural-gas supplies as households turn up their thermostats.
Consumers, however, can breathe a sign of relief - for now - as supplies in storage and hedging by utilities look to provide a buffer from a surge in natural-gas futures that climbed by roughly 62% between Tuesday and Thursday.
&#34;Natural gas, historically speaking, is the wild animal of the commodities space,&#34; said Robert Yawger, director of energy futures at Mizuho Securities USA. &#34;People thought we were getting some pretty big numbers out of silver here in the last couple of weeks, but this natural-gas market can go really far, really fast.&#34;
Read: Natural-gas prices soar as temperatures drop. It could be the toughest test for the markets in a decade.
By all accounts, prices already have. Natural gas for February delivery (NGG26) settled at $5.045 per million British thermal units on Thursday, edging up by 3.5% to finish at the highest since Dec. 5, according to Dow Jones Market Data. On Wednesday alone, prices jumped nearly 25%.
To say that natural-gas futures surged on Wednesday would be &#34;an understatement as prices posted a gain of historic magnitude,&#34; said Tyler Richey, co-editor at Sevens Report Research, in Thursday's newsletter. &#34;Natural gas is clearly in a weather-driven market dynamic with fundamental demand driving the price action with the potential for more extreme moves pending further revisions to the forecast.&#34;
The gains for the commodity extended into Thursday, with prices trading as high $5.65, the highest intraday level since Dec. 22, 2022, before paring much of that rise.
The recent price increases have come as the Weather Channel warned Thursday of that a &#34;major, widespread, long-lasting&#34; winter storm is expected to hit parts of the South, Midwest and Northeast from Friday through Monday, with &#34;potentially damaging ice and heavy snow for million from New Mexico and Texas to parts of New England.&#34;
Forecasts call for multiple days in the New York City area where the overnight low temperatures are going to be in the single digits, said Yawger, adding that the coldest day of all looks to be the last day on the 10-day forecast, with an overnight low of 3 degrees.
&#34;That doesn't look like it'll go away anytime soon. People are going to be heavy on the thermostat for a good two weeks,&#34; he said. That's going to create a &#34;draw big&#34; on natural-gas supplies in storage.
This &#34;deep-dive arctic wave&#34; of weather is expected to envelop basically 50% of the U.S. - as many as 30 states, so it's a big storm that's not leaving soon, said Yawger.
Read: Why the winter storm that's about to hit could be especially treacherous for flying
Consumer calm
For now, natural-gas consumers across the country might not see any significant effects from the price increases since utilities tend to prepare financially for weather events like these.
'Utilities buy their gas well ahead of any weather events, thus reducing exposure to trading volatility.'Beth Sewell, Quantum Gas &amp; Power Services.
&#34;Utilities buy their gas well ahead of any weather events, thus reducing exposure to trading volatility,&#34; said Beth Sewell, president and chief executive at Quantum Gas &amp; Power Services, an energy management, procurement and consulting services firm.
Given that, she thinks the jump in natural-gas prices is &#34;more about traders thrilled with massive market volatility presenting them with an opportunity to make money - and less about actual long-term impact to retail customers.&#34;
Sewell's company supports retail marketers - which buy, sell, and manage natural gas-supply for customers - and, by and large, it's not really impacting them since most of their gas needs have been purchased for the month, and many have storage assets to draw on to fill demand during times like these, she said.
Most residential customers are shielded from higher costs for utilities through hedging activities and by regulated rate structures, said Henry Hoffman, co-portfolio manager of the Catalyst Energy Infrastructure Fund MLXAX. That can help keep a lid on monthly bills for consumers,
Sharp price spikes, however, can &#34;still pressure utilities that are insufficiently hedged, potentially leading to earnings volatility or delayed cost recovery,&#34; he said.
'Monster' supply decline
Still, what's happening now can greatly impact where natural-gas supplies stand during the summer cooling season and into next winter.
There's speculation in the natural-gas market that there will be a &#34;monster&#34; withdrawal in supplies - possibility in two weeks with some market forecasts showing a potential withdrawal in the 350 billion-plus cubic-feet levels, Mizuho's Yawger said.
If that came to fruition, &#34;it would be the second-largest storage draw of all time,&#34; he said, adding that there only have been four storage withdrawals of 300 billion cubic feet or more in the history of the Energy Information Administration's storage report.
For the week ended Jan. 16, the EIA reported a fall of 120 billion cubic feet to 3.065 trillion cubic feet in U.S. natural-gas supplies in storage. Supplies still were well above the year-ago level, and the five-year average, the data shows.
Inventory levels are not concerning at this point, but if cold persists, &#34;inventories can tighten quickly, even from a comfortable starting point,&#34; said Hoffman at the Catalyst Energy Infrastructure Fund.
What's more of a worry is that extreme weather could lead the next four-weekly inventory draws to total roughly 850 billion cubic feet, said Simon Wong, portfolio manager at Gabelli Funds. At the same time, &#34;freeze-offs,&#34; which refer to a slowdown in production caused by the cold weather and ice, can reduce output across the Appalachian, Bakken, South Central and Permian regions, he said.
At this rate, natural-gas inventory in March could be around 1.65 trillion cubic feet, which would be a 10% deficit to the five-year average, and inventory at the end of the summer could be around 3.68 trillion cubic feet, or at a 2% deficit to the five-year average, Wong said.
This would result in a market with a &#34;significant deficit&#34; by the end of winter 2026 and into 2027, said Wong.
Production would then have to grow by at least 4 billion cubic feet per day, he said. If not, there could be further upside in prices for futures contracts covering winter 2026 to 2027, he said.
-Myra P. Saefong
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
01-22-26 1612ET

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<p>Natural gas prices have surged by 62% due to an impending winter storm affecting 230 million people in the U.S. Despite this spike, consumers may not face immediate impacts on heating bills, as utilities have hedged against price volatility. The February delivery price settled at $5.045 per million BTUs, with forecasts predicting significant withdrawals from storage. Experts warn that while current price increases may not affect consumers directly, they could impact supply levels for the upcoming summer and next winter.</p>

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