Natural Gas News: Will Cold Weather and Tight Supply Drive Prices Past $3.505?

Cold Weather and Supply Concerns Drive Natural Gas Prices Higher

US natural gas prices surged on Tuesday, buoyed by frigid temperatures and ongoing supply disruptions. Futures climbed to their highest level in two years, reflecting increased demand for heating and fears of further production setbacks.

Natural gas prices rose to test a key pivot at $3.505, continuing their strong upward momentum. Cold weather across key consumption regions, declining inventories, and weak renewable power generation are amplifying the bullish sentiment in the market. An initial thrust through $3.505 could trigger a surge into minor resistance at $3.701. This is also a potential trigger point for an acceleration into $4.020.

At 13:38 GMT, Natural Gas futures are trading $3.490, up $0.046 or +1.34%

Winter Weather Sparks Strong Demand

The latest weather models project sustained cold across the US through late February, intensifying heating demand. NatGasWeather reported that multiple frosty systems will sweep across the country, with temperatures plunging as low as -10°F in some areas.

With national demand categorized as “high” for the next seven days, traders are closely watching withdrawal estimates. NGI models indicate a 90 Bcf drawdown, reinforcing concerns about shrinking inventories. At 48.5% capacity, US storage levels are tightening faster than expected, putting further upward pressure on prices.

Supply Concerns Deepen as Ukrainian Facilities Come Under Attack

The global supply picture took another hit as Russia launched a large-scale missile and drone attack on Ukraine’s energy infrastructure. Natural gas production facilities in the Poltava region sustained significant damage, raising concerns over potential supply disruptions.

Ukraine’s state gas operator confirmed emergency measures to stabilize supply, while European markets braced for potential ripple effects. Given that Europe remains dependent on LNG imports, any additional strain on global supply chains could push prices even higher.

European Inventories Declining as US LNG Demand Rises

European storage levels are now at their lowest point since the start of the 2022 energy crisis. Cold weather across northern Europe has accelerated drawdowns, with reserves depleting faster than anticipated. ING analysts noted that prolonged freezing temperatures have increased heating demand, mirroring trends seen in the US market.

Meanwhile, Asian buyers are ramping up US LNG purchases in an effort to secure supply and reduce trade imbalances with the US. Japan, South Korea, and India are among the key importers expanding long-term contracts. With the Biden administration lifting the moratorium on new LNG export permits, US exporters are expected to increase shipments, potentially tightening domestic supply further.

Market Outlook: Bullish Bias as Cold Weather Persists

With strong demand, tightening storage, and persistent geopolitical risks, natural gas prices are likely to remain supported in the near term. Further price gains could materialize if weather forecasts continue to signal below-normal temperatures into late February.

Traders should monitor production levels closely, as any further disruptions—whether from US output declines or global supply shocks—could send prices higher. While LNG exports remain a key factor, domestic heating demand will be the primary driver in the coming weeks. A break above $3.505 could signal further upside potential.

More Information in our Economic Calendar.