Natural Gas News: Will a February Cold Snap Reignite the Rally?

What Drove Last Week’s Natural Gas Price Swings?

Natural gas prices exhibited extreme volatility last week, tumbling sharply before recovering into the close. Shifting weather forecasts, storage data, and technical levels combined to create rapid sentiment changes for traders.

Last week, U.S. Natural Gas Futures settled at $4.027, up $0.079 or +2.00%.

Why Did Prices Fall Early in the Week?

The week began with significant bearish pressure, driven by forecasts for milder temperatures across the southern and eastern U.S. in early February. This outlook dampened heating demand expectations and pressured natural gas futures lower.

Adding to the bearish sentiment, the Energy Information Administration (EIA) reported a 223 Bcf storage withdrawal, which, while substantial, fell short of projections and left inventories slightly above the five-year average. The failure to meet expectations highlighted improving supply factors, weighing further on prices.

Breaking below the key support level of $3.850 signaled additional downside momentum, with prices quickly testing lower levels. Traders remained cautious as the milder weather outlook dominated the early week narrative, undermining any attempts at recovery.

What Triggered the Late-Week Rally?

By Friday, updated weather forecasts suggested the possibility of a colder air mass sweeping across the northern U.S. in early February. This shift in sentiment fueled short covering, driving prices higher into the weekend. Key technical resistance at $4.053 briefly slowed the rally, but traders interpreted the new weather data as a potential game-changer for heating demand.

Support from European markets also played a role. Elevated LNG demand amid depleted European gas inventories helped sustain U.S. feedgas exports. Combined with production constraints from earlier freeze-offs in Texas and the South, this factor provided an additional bullish undertone to Friday’s price action.

How Did Technical Levels Impact the Market?

Technical factors were critical throughout the week. Breaching support at $3.850 reinforced bearish momentum early on, with prices approaching $3.711 as the next support zone. However, once prices regained $3.850, sentiment turned cautiously optimistic. Traders focused on $4.053 as a key resistance point; any sustained breakout above this level could pave the way for a test of $4.369, the recent short-term peak.

Market Forecast: Will Volatility Persist?

The short-term outlook for natural gas hinges on weather developments. If colder trends materialize in February, prices could retest the $4.369 level and sustain further gains. Conversely, if forecasts revert to milder conditions, the market may struggle to hold above $3.850, with risks of a decline toward the January low of $3.330, followed by the $3.280 to $3.024 retracement zone.

Traders should remain vigilant, as the market’s sensitivity to shifting weather models and updated storage data could lead to continued sharp moves in either direction.

More Information in our Economic Calendar.