With the prospect of another round of Arctic temperatures arriving early next month to further test already tight storage inventories, natural gas futures rallied to a new one-year high Tuesday.

Meanwhile, forecasts for a drop in temperatures this week in the Northeast helped lift New England spot prices. The NGI National Spot Gas Average added 52 cents to $3.52/MMBtu.

The February contract surged 22 cents to settle at $3.444 Tuesday, the highest spot month settlement since December 30, 2016, when the February 2017 contract settled at $3.724.

The February 2018 contract also took out the previous intraday high set in May 2017, when the June 2017 contract reached $3.431. March couldn’t keep pace with the spot month, adding 10.8 cents Tuesday to settle at $3.039.

After the settle Tuesday, futures didn't feel like stopping. Shortly after 3 p.m. EDT, the February contract surged as high as $3.628.

The contract ran up high enough to trigger a pause in trading while CME Group expanded its daily price fluctuation limit for natural gas futures, CME spokesman Chris Grams told NGI.

“This afternoon, Henry Hub Natural Gas futures triggered a circuit breaker when trading in the February 2018 front-month futures contract reached its first circuit breaker level of $0.30 above the prior day’s settlement price,” Grams told NGI. “This resulted in a brief trading halt and an expansion to the second circuit breaker level, $0.60 above the prior today’s settlement price. The contract and all other natural gas futures subsequently reopened and traded at the expanded $0.60 limit level for the remainder of the day’s trading session.”

Futures were already on the ascendancy heading into Tuesday's trading thanks to the European weather guidance trending colder on a system projected to bring Arctic air into the Lower 48 during the first week of February.

An afternoon run of the European model "was colder trending for the first several days of February as frigid Arctic air sweeps across the central and northern U.S. and then into the East Feb. 3-4," NatGasWeather.com told clients Tuesday. "The data was more impressive with the amount of Arctic air into the north-central U.S. Feb. 5-8 but was a little slower in the way it advanced it towards the East.

"...With the Global Forecast System trending colder midday, the models are now better aligned on the coming cold pattern as another round of very strong heating demand is to come, likely pushing storage deficits versus the five-year average well over -500 Bcf when all is accounted for."

Thursday's Energy Information Administration (EIA) storage report is setting up to deliver another very large withdrawal, according to estimates as of Tuesday.

Stephen Smith Energy Associates, in its latest Weekly Gas Outlook, was calling for a 268 Bcf pull for the week ending Jan. 19, versus a seasonally normal withdrawal of 174 Bcf based on 2006-2010 norms.

PointLogic Energy estimated a withdrawal of 272 Bcf for the period, citing an uptick in demand in the South Central region during the period.

Earlier this month, EIA reported arecord 359 Bcf withdrawal for the week ended Jan. 5.

INTL FCStone Latin America Senior Vice President Tom Saal noted that the 183 Bcf withdrawal reported last week, which missed to the bearish side of expectations, was "still a big number. Any triple digit withdrawal in the wintertime is a big number...it's just that it was dwarfed by the gigantic number" from the week before.

With a 200 Bcf-plus withdrawal expected in this week's report the numbers say "they're burning a lot of gas right now," Saal said. "The question is does the market believe that's a big deal or not?" The market can't fully assess the supply situation until it knows "how low the storage is going to be in April. What's the bottom line in storage? How low are you going to go?"

Even with Tuesday's rally, Saal noted that "anybody in the physical market has seen" $3.50 natural gas before. "They've seen a lot higher prices. This is a bargain."

As for the February/March spread, Saal pointed to spread traders selling March to buy February. "Go back two weeks and you see the spread wasn't wide at all. It has been flat for about two years," he said. "On Monday the same thing happened, only on a smaller scale. February was the only month that went up."

In the spot market Tuesday, most regions followed the futures higher, with regional averages across the Gulf Coast, Southeast, Midwest and Midcontinent all adding around 20-30 cents on the day.

Prices spiked at constrained New England points ahead of colder weather expected this week.

"A weather system will continue to track into the East Tuesday and Tuesday night with areas of rain and snow, although with limited amounts cold air," NatGasWeather said. "It remains quite mild ahead of this system," which was “expected to track into the Northeast Wednesday and Thursday where it will tap a heftier dose of cold Canadian air, increasing heating demand modestly."

AccuWeather was calling for lows in the 20s and teens in Boston starting Wednesday and continuing through the end of the work week.

Algonquin Citygate jumped $8.94 to average $12.05, while Portland Natural Gas Transmission System climbed $5.26 to $11.25.

Citing "impending colder weather," Algonquin Gas Transmission issued a new Operational Flow Order beginning with Wednesday's gas day imposing penalties for imbalances.

In California, SoCal Citygate tacked on another 7 cents to average $3.46.

"Colder weather, unplanned capacity restrictions and near record winter-to-date demand" drove "moderate gains in SoCal basis prices" over the weekend, Genscape Inc. said in a note to clients Tuesday. "However, unplanned work on Line 4000 that cut import capacity last week is now expected to end Wednesday; this change along with warmer weather expected by the end of this week could mitigate the recent price increases."

Utility Southern California Gas was forecasting system demand to total 2,777,000 Dth Wednesday after totaling 3,299,000 Dth on Monday.