Natural gas prices soar with massive winter storm, arctic blast set to impact almost half the country

Extreme cold and winter weather are expected to impact much of the eastern US in the coming days, sending natural gas futures (NG=F) surging by more than 75% over the past five days to mark the largest five-day jump since at least 1990.

Shares of major US natural gas producers EQT Corporation (EQT) and Antero Resources Corporation (AR) picked up 6% and 4%, respectively, on Wednesday and added to these gains in premarket trading on Thursday.

The massive storm is expected to affect more than 150 million people, with freezing rain across much of the southeast, blizzard conditions across the Appalachians and into the mid-Atlantic, followed by an arctic blast expected to send wind chills below 0 degrees from the Dakotas to Maine and as far south as Virginia.

Natural gas is the dominant source of heating throughout the US, responsible for fueling 47% of heating demand, according to the Energy Information Administration. Gas also makes up a significant chunk of electrical generation power. Cold weather kicks up natural gas demand from both direct heating and electricity use, such as electrical system backups.

“We are anticipating a major winter weather event expected to impact much of the U.S. population this weekend, especially the Midwest and East Coast,” Kristi Noem, secretary of the Department of Homeland Security, said in an X post. “Please prepare and take precautions in the event of power outages, pipe-bursts, road closures, airport delays, flight cancellations, and freezing temperatures.”

Natural gas tends to experience far greater volatility than oil. In the northeast, for instance, demand for natural gas has grown quickly over the past 25 or so years, but pipeline infrastructure — which can only move gas so fast — hasn’t kept up.

And unlike oil, which can be moved fairly quickly by truck, pipeline, or seaborne tanker, natural gas is difficult to move by any medium other than pipelines or LNG carriers. If there is a sudden spike in demand, new pipelines can’t be built overnight, and contracts for LNG containers are often preset months in advance, making them unavailable.

Pipelines also tend to be fully booked during the winter, meaning excess demand is forced onto the little-to-no remaining capacity.

Natural gas markets are also facing a newer, but serious, strain: data centers. As Big Tech hyperscalers have raced to build out AI infrastructure, many of them have turned to natural gas for power while they wait in years-long queues to connect to the US primary power grid. That means natural gas pipeline capacity is even more restricted.

“Data center demand, higher renewables mix, & coal retirements have reduced flexibility,” and major reliability events are now a “key power sector risk,” utilities analysts at Jefferies wrote in a client note on Thursday morning. If gas deliverability were to suffer during a storm, the analysts wrote, “This would impair data center growth & public perception.”

For historical comparison, look to 2021’s Winter Storm Uri. The storm “drove significant gas and power sector disruptions with gas deliverability,” the Jefferies analysts wrote.

That same year, 87% of unplanned power generation outages due to fuel issues were related to natural gas, according to the Federal Energy Regulatory Commission.

“Severe winter storms have revealed a critical misalignment between the design of natural gas markets and the operational needs of gas-fired power plants, which are increasingly relied upon to maintain electric system reliability during periods of peak demand,” according to the Institute for Policy Integrity.

“As a result, generators often face barriers to procuring fuel when it is most needed, contributing to widespread outages during extreme weather events.”

Jake Conley is a breaking news reporter covering US equities for Yahoo Finance. Follow him on X at @byjakeconley or email him at jake.conley@yahooinc.com.

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