U.S. natural gas futures soared over 14% to a six-week high on Dec. 12 after the latest forecasts called for more cold this week than previously expected and confirmed earlier outlooks for extreme cold later in January, reminding the market of price spikes during last February's freeze.

Traders also noted production has been slow to return following freeze-offs and other weather-related declines over New Year's weekend.

"January 2022 is on pace for the coldest month since the 2014 Polar Vortex, with higher (heating) demand, deeper freeze-offs and (liquefied natural gas) feedgas all creating the potential for the largest monthly withdrawal on record," said analysts at EBW Analytics Group, noting the current U.S. gas storage surplus over the five-year average was expected to flip to a big deficit over the next five weeks "further increasing upward (price) potential."

Front-month gas futures for February delivery rose 60.8 cents, or 14.3%, to settle at $4.857 per million British thermal units (mmBtu), their highest close since Nov. 26. That was the biggest daily percentage gain for the front-month since September 2020. The jump in the front-month caused the premium of futures for February over March to jump to a record high.

During the February freeze of 2021, gas futures only climbed about 7% on one day, while spot prices soared to record highs in several parts of the country as a winter storm left millions without power and heat for days after freezing gas wells and pipes in Texas and other U.S. central states.

"Speculators are simply absorbing the weather forecasts put in front of them, and the current outlook is indeed one of notable, stronger-than-normal demand over a sustained period," analysts at Gelber and Associates said, noting "additional significant price fluctuations can be expected in coming days."

This week in the spot market, next-day power and gas prices for Wednesday in New York and New England slid as the weather briefly turns less cold after hitting their highest since January 2018 over the past few days.

Traders noted, however, that Saturday was now expected to be the coldest day of winter in the Northeast. "The very near-term weather forecast strengthened in terms of heating demand," said John Kilduff, partner at Again Capital LLC in New York.

"Just a few days ago, this weekend was not looking like anything to worry about. Now, it could be the coldest day of the winter." Lingering cold since New Year's Day continued to cause well freeze-offs and other production declines in several regions, including the Permian in Texas and New Mexico, the Bakken in North Dakota and Appalachia in Pennsylvania, West Virginia and Ohio.

Data provider Refinitiv said output in the U.S. Lower 48 states averaged 94.7 billion cubic feet per day (Bcf/d) so far in January, down from a record 97.6 Bcf/d in December. Refinitiv projected average U.S. gas demand, including exports, would slide from 133.5 Bcf/d this week to 132.7 Bcf/d next week as the weather briefly turns less cold. Traders, however, noted the latest forecasts called for extremely cold weather to return during the last week of January. The amount of gas flowing to U.S. LNG export plants averaged 12.1 Bcf/d this month, down from a record 12.2 Bcf/d in December.