The big move in commodity markets yesterday was natural Gas, with front-month Henry Hub futures surging 25%, ING's commodity expert Warren Patterson notes.

European Gas follows US higher as cold snap hits

"This followed a similar move higher on Tuesday. Henry Hub has rallied by more than 50% so far this week amid a cold freeze across the US. This is leading to a surge in heating demand and raising concerns about potential supply disruptions amid freezing conditions as far south as Texas. The potential impact is significant. We just need to look back to the February 2021 winter storm, when US natural Gas output saw its largest monthly decline on record, falling around 7% month-on-month."

"The move in Gas has caught speculators off guard. The most recent positioning data shows that speculators held a net short of 104k lots in Henry Hub as of last Tuesday, while the gross short stood at its largest since November 2024. So, short covering is adding to the move's intensity this week. However, US natural Gas storage is still comfortable. The latest data shows that storage stood at 3.19Tcf as of 9 January, 1% higher year-on-year and also 3.4% above the 5-year average. This suggests the move should be fairly short-lived, though much will depend on the severity of the storm's impact."

"The rally in the US market has had a ripple effect across global Gas markets. In Europe, TTF settled more than 9% higher yesterday and briefly broke above EUR40/MWh, its highest level since June 2025. The European market has been dealing with its own cold weather and tight storage, which supported prices. Supply concerns in the US will only add to these worries, given the potential for a disruption in US LNG flow to Europe. Given that EU Gas storage is now just 48% full, forecasts of cold weather and the risk of supply disruptions suggest market volatility will likely remain elevated in the short term."