Natural Gas News: Market Faces Volatility as Prices Slip After Five-Day Rally

Natural Gas Pulls Back After Rally as Weather Outlook Shifts

Natural gas futures slipped nearly 3% on Monday as traders took profits following a shift in weekend weather forecasts. Despite last week’s bullish momentum, the market remains prone to selling into rallies, keeping gains in check.

The recent pullback comes after a strong five-day winning streak, where prices surged 12.57% to settle at $3.725 on Friday. Colder forecasts, tightening storage, and robust LNG demand had fueled the rally, but traders are now reassessing near-term risks.

At 12:54 GMT, Natural Gas Futures are trading $3.630, down $0.095 or -2.55%.

Where Are the Key Price Levels?

The immediate resistance now sits at $3.801, with a breakout above this level potentially opening the door for a move toward January’s peak at $4.020. On the downside, support is firm at $3.505, a key pivot level. A break below this could trigger a sharper decline toward the 50-day moving average at $3.192, signaling a deeper correction.

Momentum remains critical in the short term, as any sustained move below support could shift sentiment bearish. Conversely, a renewed push higher would reinforce the recent uptrend.

Weather, LNG, and Storage Keep Bulls in Play

A major cold front, driven by a Polar Vortex, is set to grip key demand regions from February 19-23, likely pushing heating demand sharply higher. With storage already drawing down at a faster-than-expected pace, the upcoming EIA report will be closely watched for signs of further tightening.

LNG exports remain a bullish force, with feed gas flows reaching 15.4 Bcf/day, up 3.8% from the previous week. U.S. exports are playing a critical role in balancing global gas markets, especially as European storage levels have dipped to 47% capacity, below the five-year average.

Meanwhile, the Trump administration’s decision to lift restrictions on new LNG export projects could add long-term bullish pressure. The policy shift could increase export capacity and reduce available domestic supply over time.

Supply Growth Lags Behind Surging Demand

Despite high demand, U.S. dry gas production remains sluggish, rising just 0.5% year-over-year to 106.4 Bcf/day. Consumption, however, has surged to 110.0 Bcf/day, up 14.2% from a year ago. The residential and commercial sectors are leading demand growth, with power generation also seeing a 4.8% rise.

While Baker Hughes reported a slight uptick in U.S. natural gas drilling rigs to 101, overall activity remains well below 2022 levels, limiting any near-term production surge. This supply-demand imbalance could keep storage levels under pressure, supporting prices.

Market Forecast: Bullish but Volatile

Natural gas remains in bullish territory, but traders should brace for volatility. If prices push above $3.80, a test of $4.00 is likely. However, any signs of demand weakness or a supply rebound could trigger another wave of selling.

With extreme cold in the forecast and storage drawdowns tightening, upside risks remain dominant. Traders should watch key support and resistance levels closely, as momentum will dictate the next move.

More Information in our Economic Calendar.