Natural Gas Continues Strong Rally and Achieves Three-Year High
Natural gas futures are moving upward fast and could pass $5.00 very soon for the first time since 2022.
Quick overview
- Natural gas prices reached a 3-year high of $4.95/MMBtu, significantly up from the October low.
- The increase in prices is driven by colder weather forecasts and higher demand as Europe boycotts Russian gas.
- Gas prices have surged 65% since October, with utilities withdrawing more gas than expected to meet heating needs.
- Analysts predict prices may stabilize around $5.00 due to ample supply, despite the ongoing rally.
Natural gas prices hit $4.95/MMBtu on Wednesday, marking a 3-year high for the U.S. market and now up substantially from the2025 low point back in October.
Europe is helping the U.S. gas market along by boycotting Russian gas. Now, with colder weather forecasts coming in and increased gas usage in the winter season, gas prices are up 65% from their October low.
Gas prices are expected to continue to rally through the end of the year thanks to increasingly colder weather and greater demand that is simply part of the season. The last EIA reading showed that gas utilities pulled out 11 billion cubic feet of gas from the second to last week in November. This unexpected withdrawal has helped spur gas prices higher as the oversupply problem starts to fade away.
Extended Gas Rally May Not Slow Down
The U.S. Henry Hub gas futures have shot up since September closed off this year. They have risen 40% in that time, and price growth has outpaced even the early 2025 rally from January to March.
Prices may remain high as colder weather sets in, and forecasts are showing that colder weather is expected to dominate through the next couple of months. Utilities will work to keep costs down but will have to pay up anyway for necessary natural gas supplies to meet the demand of their customers.
Back in January, the price of natural gas rose to only $3.50, and the current rally could easily hit $5.00 very soon. The last time we saw that benchmark was back in 2022. Even though there is still ample supply of natural gas throughout the United States, utilities are dipping deeper into those reserves than expected due to multiple cold fronts and higher demand for heating. We may see the rally extend for weeks if not months from here.
If the price of gas futures moves beyond $5.00, it might level out at that point. The market is likely to equalize then and pull back against rising prices when supply is still so abundant. We anticipate the price will soon pass that important level but will not move much past it.
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