Natural Gas News: Arctic Air Spurs Demand Surge, but Surplus Caps Market Rebound

Natural Gas Futures Rebound as Cold Weather Lifts Demand

Natural gas futures are rising after last week’s pullback, with February contracts gaining strength as cold weather returns to large parts of the U.S. This rally comes after the market tested key support levels following a volatile week. Last Monday, futures gapped higher to $4.201 but faced selling pressure throughout the week, ultimately finding support at $3.391.

Today’s price action reflects renewed buying interest as traders react to frigid temperatures sweeping across the Lower 48. Resistance is currently seen at $3.765, $3.904, and $4.201, while support remains at $3.391 and $3.197. The market is bracing for near-term volatility driven by shifting temperature forecasts, which could lead to two-sided trade.

At 15:28 GMT, Natural Gas futures are trading $3.586, up $0.232 or +6.92%.

Cold Weather Sparks Demand Surge

Weather forecasts indicate a significant demand spike as arctic air dominates the Midwest and East Coast. According to NatGasWeather, national demand will remain strong through January 12, with temperatures plunging to -0s and 20s across much of the central and eastern U.S. Even the South, including Texas, is set to experience lows in the 10s to 20s. Meanwhile, a winter storm is bringing heavy snow and ice from the Plains to the Mid-Atlantic, intensifying heating demand.

Storage Surplus Still Limits Upside

Despite the weather-driven rally, last week’s EIA report revealed a smaller-than-expected withdrawal of 93 Bcf, below the 100 Bcf anticipated by analysts. Total inventories sit at 3,529 Bcf, reflecting a surplus of 166 Bcf above the five-year average. While another draw of 127 Bcf is forecast, the persistent surplus is keeping bullish sentiment in check, preventing a sustained breakout.

LNG Exports to Mexico Offer Some Support

In addition to weather, export demand is providing modest support. Mexico’s rising LNG needs continue to drive flows from South Texas, helping to offset some of the oversupply. New Fortress Energy’s Fast LNG project remains a steady outlet for excess gas, contributing to market stability.

Short-Term Bearish Outlook Prevails

While today’s rally highlights the influence of cold weather, the overall outlook remains bearish. Storage levels well above average will likely restrict price gains unless prolonged extreme cold persists. Traders should anticipate resistance near $3.765 and $4.201, with further downside risk if forecasts moderate in the coming days. Expect choppy trade as the market balances weather shifts against surplus inventories.

More Information in our Economic Calendar.