Natural Gas News: Colder Weather Forecast Lifts Prices Despite Bearish Inventory Report

Natural Gas Prices Rise on Colder Weather Outlook Despite Bearish Storage Report

February natural gas futures posted gains on Friday, driven by forecasts for colder weather in January. However, upside momentum was limited by a bearish government storage report.

Colder Weather Supports Prices

Forecaster Maxar Technologies indicated that below-normal temperatures are expected to affect the central and eastern U.S. between January 1-5, with further intensification in the subsequent five days. The prospect of increased heating demand helped lift natural gas prices, with February Nymex natural gas (NGG25) closing higher.

Bearish Storage Data Limits Upside

Despite the weather outlook, Friday’s market retraced some gains following the release of the U.S. Energy Information Administration’s (EIA) weekly storage report. The report showed a 93 Bcf withdrawal from inventories for the week ending December 20, falling short of the expected 100 Bcf draw and significantly below the five-year average withdrawal of 127 Bcf. Total working gas in storage stood at 3,529 Bcf, marking an increase of 14 Bcf year-over-year and positioning stocks 166 Bcf above the five-year seasonal average of 3,363 Bcf.

Production and Demand Trends

U.S. dry gas production reached 106.4 Bcf/day on Friday, reflecting a 1.2% year-over-year increase. Meanwhile, demand surged to 93 Bcf/day, up 6.8% from the previous year. Liquefied natural gas (LNG) flows to export terminals dipped slightly by 1.4% week-over-week to 14.4 Bcf/day.

Electricity output also supported demand, with the Edison Electric Institute reporting a 1.87% year-over-year increase for the week ending December 21. Total U.S. electricity production for the 52-week period rose by 2.32% compared to the previous year, boosting natural gas consumption by utilities.

Chart Analysis and Key Technical Levels

The chart highlights the recent rally in natural gas prices, showing a clear breakout above the 50-day (2.76) and 200-day (2.97) moving averages. The price recently reached a high of 3.614 before retracing slightly to 3.383, signaling resistance near the 3.60 level. Key support now lies near 2.90, aligning with previous consolidation areas.

This technical setup indicates bullish sentiment as long as prices stay above the moving averages, with 3.00 acting as psychological support. However, a drop below the 50-day moving average could trigger renewed selling pressure.

Market Forecast

While colder weather forecasts provide near-term support, the larger-than-expected storage surplus and stable production levels create a bearish undertone for natural gas prices. The chart suggests that further upside could face resistance near 3.60, with sustained cold weather needed to drive prices higher. Without stronger demand signals, prices may consolidate around current levels or pull back to test support at 2.90.

More Information in our Economic Calendar.