Natural Gas News: Will Cold Weather and Tight Storage Drive Prices Above $4.02?

Can Winter Demand Keep Prices Elevated?

Natural gas futures climbed for a fifth straight session on Friday, continuing their bullish momentum as traders braced for another round of frigid weather. Prices settled at $3.725, marking a 12.57% gain for the week, supported by colder forecasts, strong LNG demand, and tightening storage levels.

A Polar Vortex is expected to bring subzero temperatures to key U.S. demand regions from February 19-23, raising heating needs and reinforcing bullish sentiment. Storage drawdowns have been steeper than expected, and traders are watching whether upcoming EIA reports will further tighten the market.

LNG Exports Hit Record High

Liquefied natural gas (LNG) exports continued at a record pace, with feed gas flows reaching 15.4 Bcf/day—up 3.8% week-over-week. With global gas markets still adjusting to geopolitical disruptions, U.S. LNG remains a crucial supply source, particularly as European storage levels sit at 47% capacity, below the five-year average.

The Trump administration’s recent decision to lift restrictions on new LNG export projects is another supportive factor. The move reactivates a backlog of pending approvals, potentially increasing long-term U.S. export capacity and tightening domestic supplies.

Storage Draws Outpacing Expectations

Thursday’s EIA report showed a -100 Bcf storage draw for the week ending February 7, exceeding analyst expectations of -91 Bcf. Although the draw was smaller than the five-year average of -144 Bcf, inventories are now 9.2% lower year-over-year and 2.8% below their five-year seasonal average.

With demand surging, the U.S. lower-48 gas market saw consumption hit 110.0 Bcf/day, a 14.2% year-over-year increase. Residential and commercial sectors are driving the bulk of demand, alongside a 4.8% rise in electricity output from utilities.

Production Edges Higher but Fails to Offset Demand

Dry gas production in the lower-48 states rose to 106.4 Bcf/day, a modest 0.5% year-over-year increase. However, with demand significantly outpacing supply, inventories are expected to remain tight. Additionally, Baker Hughes reported a slight uptick in U.S. natural gas drilling rigs, rising to 101, but rig counts remain far below 2022 levels, limiting production expansion.

Market Forecast: Bullish Bias Holds, but Resistance Looms

Natural gas prices remain well-supported by strong winter demand and tightening storage, with additional upside likely if cold weather persists. A sustained move above $3.505 could open the door for a move toward $4.020, followed by $4.093, which is the trigger point for an acceleration into $4.456,

With a tendency to sell rallies in natural gas, traders should watch for signs of demand softening or a production rebound that could limit gains.

For now, the market remains in bullish territory, with weather and export trends dictating near-term price action.

More Information in our Economic Calendar.