U.S. gas prices spike on winter storm
Freezing temperatures and disruptions to the electric grid and gas system have caused U.S. gas prices to shoot up. The impacts are being felt in Europe.
U.S. gas prices skyrocketed in recent days as a winter storm swept across the country, pushing up demand and threatening to disrupt supply. The price impacts were felt across the Atlantic in Europe, where gas prices shot up on increased risk of interruptions to the LNG trade.
Front-month Henry Hub gas contracts soared from $3.10 per MMBtu on January 16th to $5.28/MMBtu on January 23rd, a roughly 70 percent increase in just a week. The spike was the result of a winter storm full of snow, ice, and freezing temperatures, which stretched from West Texas all the way across the continent to the Mid-Atlantic and New England.
“Tuesday and Wednesday together saw the front month rise by 57%, the largest two-day increase (by percentage) in the history of NYMEX gas trading. Thursday brought more of the same, with the front-month breaching the $5/MMBtu mark as the forecast turned even more bullish,” RBN Energy wrote in a note on Friday.
As of Sunday night, gas futures topped $6/MMBtu. Prices on the spot market shot up even higher, jumping to over $8/MMBtu.
Ahead of the storm, the electric grid operator for Texas, ERCOT, issued a weather watch due to below-freezing temperatures and the likelihood of higher electricity demand.
The event immediately brought to mind the disastrous 2021 winter storm that led to widespread blackouts in Texas, severe disruptions to energy supplies, and the death of 246 people.
However, in the past five years, Texas has added around 40 gigawatts of solar and battery storage, which better equipped the state’s grid to handle the extreme weather. Nevertheless, the major gas-producing shale basins are not hardened to withstand freezing temperatures.
“Notably, the forecast calls for freezing temperatures in all three of the largest gas producing regions: Appalachia, the Permian and the Haynesville. This could cause simultaneous freeze-offs in all the most important gas-producing regions at a time when demand is at its peak,” RBN said.
By Sunday, the impacts were already significant, with over 1 million people without power, as Bloomberg reported. Wholesale electricity prices in Texas, temporarily shot up to $1,500 a megawatt hour in and around the Dallas area. The grid operator PJM, which manages electricity across 13 states in the Mid-Atlantic, saw prices skyrocket to $3,000, before settling back down. ExxonMobil shut down its Baytown oil refinery near Houston. Some research firms estimated that the damages from the winter storm could exceed $24 billion.
Texas is expected to see electricity demand hit 84.5 gigawatts on Monday, which would be an all-time record.
Some experts saw the Trump administration’s prioritisation of exporting gas in the form of LNG, and federal efforts at blocking the development of renewable energy, as exacerbating the strain on the country’s electric grid and gas system.
“Millions of people just trying to survive a massive storm are about to pay higher bills because CEOs at utilities and fossil fuel companies have locked us into natural gas,” Tyson Slocum, director of the energy programme at Public Citizen, a Washington DC-based advocacy group, said in a statement. “No sane energy policy would rely on a fuel source that can increase in cost 50% overnight because of a storm.”
“Trump is letting them run the show and making matters even worse by sending US gas overseas at record rates, even as it helps drive our bills to record highs,” he said.
Winter storm felt in Europe
Gas supplies to multiple LNG terminals – the Gulf Coast facilities of Sabine Pass, Corpus Christi LNG, and Freeport LNG in Texas, along with the Cove Point LNG terminal in Maryland – all saw reduced gas flows. Gas delivered to U.S. LNG terminals could drop by 2.5 billion cubic feet per day, which could temporarily lower gas exports, according to a note from Goldman Sachs.
European gas prices (notably the TTF marker) had also been on the rise in recent days because of colder temperatures. But the U.S. storm added to upward pressure on TTF prices in Europe.
“The knock-on effect is real but not the main factor. The main reason is freezing temperatures in the three main gas consuming regions, compounded by aggravating factors such as low storage levels in Europe and nuclear outage in France,” Geoffroy Hureau, the Secretary General of Cedigaz, a Paris-based gas analysis association, told Gas Outlook. He added that speculators who had been shorting gas ended up liquidating their positions, which also contributed to the sudden increase in TTF prices.
But the increased LNG trade between the U.S. and Europe has strengthened the degree to which prices on one side of the Atlantic impact prices on the other.
“What started as a European winter weather rally on TTF suddenly morphed into a transatlantic gas pricing surge, as fears grew of a potential freeze-off disrupting US shale production and feed gas flows to US Gulf Coast LNG export plants,” Seb Kennedy, founding editor of Energy Flux, an independent analytics platform for gas and LNG, told Gas Outlook.
He said that the winter extremes in the U.S. are “fuelling scarcity fears in Europe.”
February contracts for TTF jumped to around $13.65/MMBtu on Friday, up 4 percent on-the-day, and up substantially from $9-$10/MMBtu in December. The sudden price increase is a reminder that Europe’s dependence on LNG brings bouts of extreme price volatility.
The market turmoil also comes just days after U.S. President Donald Trump threatened to annex Greenland, only to back down after facing resistance. The Trans-Atlantic rift has threatened to derail the 2025 trade deal between the two sides, a pact that included commitments for Europe to purchase enormous volumes of LNG.
“Europe traded a dependency on Russian geopolitical risk for a dependency on global market risk—and right now, the U.S. is the biggest driver of that market,” Geoffroy Hureau of Cedigaz said. “A ‘rethink’ is inevitable but options are limited in the short term: waiting for the next wave of Qatari supply to dampen volatility, while continuing to reduce gas demand structurally through renewables.”
EU executive vice-president Teresa Ribera argued that the geopolitical uncertainty underscores the need to reduce fossil fuel imports. Climate policies could enhance economic independence.
“I could even say that it is also time to reconsider and reframe the Green Deal as a Freedom Deal,” she told the FT. Instead, the EU should “count on our own homegrown energy model.”
(Writing by Nick Cunningham; editing by Sophie Davies)