The natural gas market was jolted awake on Tuesday as a displaced polar vortex tears through the Northern Hemisphere, bringing freezing temperatures to much of the central and eastern United States.
U.S. natural gas futures have ignited, surging 27% to trade near $3.94 per MMBtu, according to Trading Economics.
Tuesday's meltdown in market stability marks the largest single-day percentage gain in over a year, driven by a scramble among traders to price in the extremely cold forecast that extends through the end of January.
Frigid Forecast
According to the latest NOAA Climate Prediction Center outlook, Arctic air spilling south from Canada is expected to hold the central and eastern U.S. in a sub-zero grip for the next ten to 14 days.
Wind chills are forecast to plunge as low as -30°F in the Upper Midwest, with freezing temperatures reaching as far south as Florida.
The severe cold snap is projected to send residential heating demand to record seasonal highs, testing the resilience of a grid already strained by peak winter power generation.
The natgas price surge is amplified by massive short-covering, as market participants who bet on a mild winter are forced to liquidate positions.
Though domestic natural gas production remains near record levels, the intensity of the frost premium is overriding supply fundamentals.
With nearly 200 million Americans facing below-freezing conditions, the energy sector is bracing for a sustained period of high volatility as storage inventories are expected to see their largest withdrawals of the season.
Natural Gas Tickers & ETFs to Watch
As the natural gas trade heats up, investors are closely monitoring these high-performing tickers:
Direct Commodity Exposure (ETFs):
- United States Natural Gas Fund (NYSE:UNG): The primary vehicle for tracking Henry Hub spot prices.
- ProShares Ultra Natural Gas (NYSE:BOIL): A 2x leveraged ETF seeing massive volume on Tuesday.
- First Trust Natural Gas ETF (NYSE:FCG): Holds a basket of the top U.S. producers.
LNG Stocks:
- EQT Corp. (NYSE:EQT): The largest U.S. producer, often the first to move on cold-weather news.
- Antero Resources Corp. (NYSE:AR): Highly sensitive to price spikes; surging on increased Northeast demand.
- Williams Companies, Inc. (NYSE:WMB): A key midstream player moving gas into the frozen Northeast markets.
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