US natural gas markets were jolted into rare territory as futures surged above $6 per million British thermal units, marking the highest levels since late 2022. The move reflects a sharp repricing of weather risk as an intense cold wave swept across large parts of the country, disrupting production while simultaneously triggering a spike in heating and power-generation demand. The scale and speed of the rally underscore how vulnerable the gas market remains to extreme weather shocks, even in an era of record US production.

Supply Disruptions Meet Surging Demand

The immediate catalyst behind the price spike has been the sudden loss of supply. Nearly 10% of US natural gas output was knocked offline as freezing temperatures caused wellhead freeze-offs and operational disruptions, particularly in key producing regions. At the same time, residential and commercial heating demand surged as temperatures plunged well below seasonal norms across much of the country.

Electricity consumption is now projected to reach winter record levels, forcing grid operators to issue warnings to power generators to secure sufficient fuel supplies. Natural gas, which accounts for roughly a quarter of US energy consumption, sits at the center of this stress test. When weather-driven demand accelerates faster than supply can respond, even a structurally well-supplied market can tighten abruptly.

LNG Exports Take a Back Seat

One of the more notable side effects of the cold snap has been a sharp decline in gas flows to liquefied natural gas export facilities. With domestic power and heating needs taking priority, feedgas deliveries to LNG terminals have dropped to their lowest levels in roughly a year. This temporary pullback highlights the balancing act facing the US energy system: serving domestic reliability during extreme weather while maintaining its role as the world’s largest LNG exporter.

Over the past several years, US LNG exports have become a critical outlet for surplus production, linking domestic prices more closely to global energy dynamics. During periods of stress, however, the system effectively deglobalizes, with domestic demand crowding out exports and amplifying price swings at home.

A Rally Built on Psychology as Much as Fundamentals

The roughly 70% surge in prices over the past week—one of the largest weekly gains in decades—also reflects investor psychology. Extreme weather events compress time horizons, forcing traders and utilities to secure supply at almost any cost. This behavior can overshoot fundamentals in the short term, especially when storage withdrawals accelerate faster than expected.

While inventories remain above five-year averages, markets are increasingly focused on the rate of drawdowns rather than absolute levels. The fear is not running out of gas, but running out of flexibility during peak demand windows.

What Comes Next for Prices?

Looking ahead, the trajectory of natural gas prices will hinge on how long the cold persists and how quickly production can normalize. If temperatures moderate in early February and freeze-offs ease, prices could retreat sharply, as has often happened after weather-driven spikes. However, prolonged cold or additional storms would keep pressure on both supply and storage, sustaining elevated volatility.

Beyond this winter, the episode serves as a reminder that despite abundant resources, the US natural gas market remains highly sensitive to extreme weather, infrastructure constraints, and behavioral responses under stress.