Extreme cold weather in the United States triggers the energy market, natural gas prices skyrocket, and supply shortages increase the risk.

The United States is about to experience a widespread cold wave that is expected to affect approximately 230 million people. With residents significantly increasing their heating demand, there are concerns in the market that there may be temporary tightness in natural gas supply, driving futures prices to spike sharply this week. However, analysts point out that ordinary consumers may not need to worry excessively in the short term. Due to the relatively ample natural gas inventory in the United States, coupled with utility companies' advanced procurement and hedging arrangements, it is expected to provide a buffer for end-users to prevent the sharp rise in natural gas futures from immediately passing on to residents' bills. "From a historical perspective, natural gas has always been the 'wildest' commodity in the market," said Robert Yawger, head of energy futures at Mizuho Securities. "In recent weeks, the market has been discussing huge fluctuations in silver, but the trend in the natural gas market may be faster and more violent." Data shows that U.S. natural gas futures for February delivery closed at $5.275 per million British thermal units on Friday, up 4.6%, reaching the highest level since December 5 last year. Just on Wednesday, natural gas prices surged nearly 25%. Tyler Richey, co-editor of Sevens Report Research, pointed out that using the word "surge" to describe Wednesday's market performance even seemed conservative. It was a historically significant surge, and the natural gas market has entered a typical "weather-driven" mode, with the potential for more extreme volatility due to forecast adjustments. The background of this rapid price increase is a warning from the U.S. meteorological department that a "significant, widespread, and long-lasting" winter storm will last from Friday until next Monday, affecting many regions in the southern, midwestern, and northeastern United States, with severe freezing and heavy snowfall expected from New Mexico and Texas to parts of New England. Yawger stated that the overnight low temperatures in the New York area could drop to single digits Fahrenheit over the next few days, with the coldest day in the 10-day forecast possibly dropping to 3 degrees Fahrenheit. "This cold weather won't dissipate quickly, and over the next two weeks, there will be a very strong demand for heating among residents, leading to a significant consumption of natural gas inventories." It is reported that this "deep cold wave" is expected to cover about 50% of the United States, involving as many as 30 states, and is a strong cold weather system that is unlikely to leave in the short term. Despite the volatile fluctuations in the futures market, industry insiders believe that the short-term impact on end-user residents may be limited. Beth Sewell, CEO of Quantum Gas & Power Services, pointed out that utility companies usually purchase natural gas in advance before weather events occur to reduce exposure to market trading fluctuations. "This round of price surges is more of traders seeking profit opportunities in the huge volatility, rather than a signal of long-term impact on retail customers." Sewell added that most retail energy suppliers have already purchased the natural gas they need for this month in advance and have storage assets to allocate during peak demand, so the overall impact is manageable. Henry Hoffman, co-portfolio manager of Catalyst Energy Infrastructure Fund, also stated that residential users can partially insulate themselves from cost pressures and suppress significant fluctuations in monthly bills through utility companies' hedging mechanisms and regulated pricing structures. However, he also warned that if some utility companies do not hedge adequately, extreme price surges may still bring profit fluctuations or delays in cost recovery. The market is more concerned about the long-term impact of this cold wave on inventory levels. Yawger revealed that the natural gas market is currently speculating that there may be a significant drop in inventories in the next two weeks, with some forecasts showing a weekly withdrawal of over 350 billion cubic feet. If this forecast were to come true, it would be the second largest gas consumption record in history, as the Energy Information Administration (EIA) has only seen over 300 billion cubic feet withdrawn in a week four times in its history. EIA data shows that as of the week ending January 16, U.S. natural gas inventories decreased by 120 billion cubic feet to 3.065 trillion cubic feet. Although inventories are still higher than the same period last year and the five-year average, Hoffman pointed out that if the severe cold continues, "even with a good starting point, inventories could quickly tighten." Simon Wong, portfolio manager of Gabelli Funds, further warned that if cumulative withdrawals from inventories reach around 850 billion cubic feet in the next four weeks, and cold weather causes "freeze-offs" leading to production declines, major supply regions such as the Appalachia, Bakken, South-Central, and Permian Basin could be impacted. Wong projected that if the current trend continues, inventories in March could drop to around 1.65 trillion cubic feet, 10% lower than the five-year average; end-of-summer inventories could be only about 3.68 trillion cubic feet, 2% lower than the five-year average. This will lead to a "significant shortfall" in the market by the end of the winter of 2026 and into 2027. He pointed out that to fill this gap, U.S. daily natural gas production would need to increase by at least 4 billion cubic feet. Otherwise, there is still room for further upward movement in futures contract prices covering the winter of 2026 to 2027.