Natural gas producers rally as futures surge 18% to $6.29
Arctic blast triggers production freeze-offs, short squeeze lifts EQT, Coterra
Natural gas producers climbed in premarket trading on Monday as Henry Hub futures surged 18% to $6.29 per MMBtu, the highest level since late 2022, driven by severe winter weather that has crippled production across the United States.
The February futures contract, which became the front-month contract on January 26, jumped as much as 19% to $6.288 per MMBtu, capping a remarkable rally that saw prices climb 70% over the preceding week—the largest weekly advance recorded since 1990.
An Arctic cold front, including Winter Storms Blair and Cora, has gripped much of the US, sending heating demand soaring and triggering widespread "freeze-offs" at wellheads where liquids in natural gas streams freeze, severely disrupting production. By January 22, nearly 10 billion cubic feet per day of natural gas production was offline due to these weather-related disruptions, with forecasts indicating curtailments could range from 8.5 Bcf/d to 20.4 Bcf/d.
Approximately 10% of US natural gas production remained offline as of Monday, creating what analysts described as a "perfect storm" of elevated demand, constrained supply, and aggressive short covering.
EQT Corporation, the largest US natural gas producer with a $34.6bn market capitalization, gained approximately 8.5% over two days and rose as much as 7.1% in a single session. The Pittsburgh-based company, focused on the Marcellus and Utica Shales, saw its shares advance to $55.52 in early trading. EQT's chief financial officer said the company would be "working around the clock to keep production flowing" amidst the storm.
Coterra Energy, which operates across multiple US basins and carries a $20.4bn market cap, saw its shares climb 3.3% to $27.42. The Houston-based producer offers investors a 3.32% dividend yield and trades at 12.38 times earnings.
The price surge was amplified by a short squeeze, as speculators who had anticipated a milder winter were forced to cover their positions, buying back contracts and driving prices higher. Low inventory levels at the start of the heating season exacerbated the supply-demand imbalance.
Analysts remain broadly positive on the natural gas producer sector despite concerns about weather-related production volatility. EQT currently boasts 20 buy ratings compared to just six hold recommendations from analysts, while Coterra enjoys similar support with 19 buy ratings versus five holds.
The rally comes after a period of relative stability for natural gas prices, which had averaged around $3.70 per MMBtu in first-quarter 2025 forecasts. The sudden reversal underscores the sector's vulnerability to extreme weather events and the importance of production flexibility during peak demand periods.