On February 19, 2025, the Henry Hub spot natural gas price spiked to about $7.78 per MMBtu, nearly double the price of the March 2025 futures contract trading around $4.28 per MMBtu.¹

Source: S&P CapitalIQ

Such a wide gap between spot and futures pricing is unusual, signaling a significant short-term supply-demand imbalance. In this case, a “perfect storm” of factors – from frigid weather and surging consumption to supply constraints and changing market dynamics – combined to drive spot prices dramatically higher than what traders had anticipated in the futures market.

Frigid Weather Spurs a Demand Surge

Extreme winter weather was a primary catalyst for the spot price surge. Mid-February 2025 brought a severe cold snap across large swathes of the United States, sharply boosting heating demand. Nationwide temperatures were 31% colder than normal (and 38% colder than the prior year) for the week ending February 22, 2025.² This translated into soaring natural gas consumption for space heating in homes and businesses.

The impact of this heightened demand was reflected in regional price surges:

• Boston’s Algonquin Citygate Hub: $18.30/MMBtu
• New York’s Transco Zone 6 NY: $13.74/MMBtu
• Chicago City-Gate Gas: $7.82/MMBtu

Tight Supply / Low Storage Levels

While demand was surging, supply fundamentals were also under stress. U.S. natural gas production had been strong leading up to 2025, but the extreme cold caused freeze-offs at many wellheads, temporarily curbing output.³

Industry analysts have warned that more frigid temperatures could freeze equipment and reduce production, tightening supplies right when they were needed most.⁴ The market also lacked a cushion from storage. After heavy withdrawals earlier in the winter, underground storage inventories were already below the five-year average heading into mid-February.

The week of the price spike saw an enormous 261 Bcf net withdrawal from storage – far above the typical ~141 Bcf draw for that week.⁵ This steep pull brought working gas stocks down to a level roughly 11% lower than normal for that time of year.⁶

Pipeline Constraints Exacerbate Regional Spikes

Another critical factor was the limitation of the nation’s pipeline network to deliver gas where it was most needed. The U.S. pipeline infrastructure was effectively maxed out in certain corridors during the cold snap, creating bottlenecks that led to extreme regional price differences.

Areas like the Northeast, which rely on gas shipped in from other regions, faced infrastructure constraints that prevented enough fuel from arriving during the peak demand period. Even in producing regions of the country, pipeline constraints also played a role.

External Market Shocks and Global Factors

Beyond domestic weather and infrastructure challenges, other industry factors added more pressure on spot prices. One was the role of global demand via LNG (liquefied natural gas) exports. Obviously, U.S. LNG exports reduce the supply of natural gas to serve American needs.

In addition, an unexpected tariff policy announcement in early February created market jitters. The U.S. government had announced a potential 10% tariff on natural gas imports from Canada.⁷ While implementation was paused until early March, the mere prospect of a tariff introduced uncertainty about future supply from Canada.

Futures Pricing vs. Spot Pricing

As seen, spot prices moved much more than futures pricing for natural gas, given that spot prices deal with the physical reality that a volume of natural gas needs to be available where needed, when needed, or else the burners will go out and the turbines will stop turning.

Conclusions

The February 2025 Henry Hub price spike underscores the complex interplay of weather, infrastructure, policy, and market forces in natural gas pricing and highlights the importance of risk management strategies, contract considerations, and regulatory developments that influence commodity markets and pricing.

WTI Strip Prices Decrease

Amidst a backdrop of uncertainty over changing U.S. trade policies and tariff uncertainty, spot prices and futures prices for the West Texas Intermediate (WTI) contract decreased approximately $7.00 per barrel in the near term and decreased approximately $3.75 over the longer term.

WTI Strip Prices – One Month Change

As shown, the oil price curve remains in a state of “backwardation,” reflecting the market’s expectation of lower future spot prices.

Oil Price Outlook

The price distribution below shows the crude oil spot price on March 11, 2025, as well as the predicted crude oil prices based on options and futures markets. Light blue lines are within one standard deviation (σ) of the mean, and dark blue lines are within two standard deviations.

Based on these current prices, the markets indicate there is a 68% chance oil prices will range from $55.50 and $76.50 per barrel in mid-June 2025. Likewise, there is roughly a 95% chance that prices will be between $42.00 and $96.00. By mid-August 2025, the one-standard deviation (1σ) price range is $53.00 to $79.00 per barrel, and the two-standard deviation (2σ) range is $37.00 to $104.50 per barrel.

Insights

Remember that option prices and models reflect expected probabilities, not certain outcomes, but that does not make them any less useful. Throughout most of 2023 and 2024, crude oil spot prices have primarily fluctuated within the range of $70 to $90 per barrel. During that time, we observed general increases in futures price volatilities as prices neared the upper bound of that range, as evidenced by the futures price ranges observed. For mid-August 2025 pricing as of March 11, 2025, the 1σ range had a spread of $26.00 per barrel, and the 2σ range had a spread of $67.50 per barrel. For comparison, in 2022 we observed 1σ and 2σ price ranges in excess of $65.00 and $150.00, respectively.

1. Natural Gas Weekly Update, U.S. Energy Information Administration, webpage, February 27, 2025.
2. National Oceanic and Atmospheric Administration, U.S. Department of Commerce.
3. Natural Gas Weekly Update.
4. Ibid.
5. Ibid.
6. Ibid.
7. Robert Rapier, “How Trump’s Tariffs on Mexico and Canada Could Impact U.S. Gas Prices,” Forbes, March 4, 2025.