US natgas futures climb to 12-week high on extreme cold forecasts

US natural gas futures rose almost 3% to a 12-week high on Friday on forecasts calling for the coldest weather of the winter to hit in mid February.

"A blast of Arctic air will sweep through the Central states in the coming days. The frigid weather will usher in the lowest temperatures of the season so far," meteorologists at AccuWeather said, noting lows in Chicago are forecast to dip below zero degrees Fahrenheit (-18 degrees Celsius) during several nights.

Front-month gas futures rose 10.7 cents, or 3.7%, to $3.042 per million British thermal units at 8:04 a.m. EST (1304 GMT), putting the contract on track for its highest close since Nov. 11.

That increase pushed the premium of the front-month over the second-month to its highest since January 2019.

For the week, the contract was up about 18% after gaining almost 5% last week. That puts it on track for its biggest weekly percentage gain since August 2020.

Data provider Refinitiv said output in the Lower 48 US states averaged 90.4 billion cubic feet per day (bcfd) so far in February. Traders noted that was down from 91.0 bcfd in January, due in part to the freezing of some wells. Output hit an all-time monthly high of 95.4 bcfd in November 2019.

With colder weather coming, Refinitiv projected average gas demand, including exports, would jump from 127.4 bcfd this week to 134.2 bcfd in next week and 145.2 bcfd in two weeks. The forecast for next week, however, was lower than Refinitiv's outlook on Thursday.

That cold blast is already moving across Alberta in Canada where next-day gas prices at the AECO hub rose to their highest since March 2019.

The amount of gas flowing to US liquefied natural gas (LNG) export plants averaged 10.7 bcfd so far in February, up from January's 10.4 bcfd average and on track to tie December's 10.7 bcfd record high.

That LNG record came as buyers around the world purchased near record amounts of US gas because prices in Europe and Asia remain much higher than in the United States.