Natural Gas News: Will Weather Trends Keep Futures Under Pressure This Week?

Is the Market Pricing in Bearish Fundamentals?

U.S. natural gas futures closed the week lower as traders reacted to rising production and weakening demand expectations. The market showed little upside momentum despite a large storage draw, as attention shifted to storage rebuilding and near-term fundamentals.

Last week, U.S. Natural Gas Futures settled at $3.044, down $0634 or -$17.24%.

With January’s deep freeze fading, demand has moderated, and forecasts indicate mild weather across much of the U.S. in early February. While parts of the Midwest and Northeast could see colder air, analysts expect overall heating demand to decline. At the same time, natural gas output remains strong, keeping supply elevated and reducing the likelihood of significant storage deficits in the coming months.

What Did the EIA Storage Report Reveal?

The latest EIA report showed a 321 Bcf withdrawal for the week ending January 24, one of the largest draws this season. This figure significantly exceeded the five-year average draw of 187 Bcf, reflecting the impact of the Arctic blast that swept through the U.S. in mid-January.

Total working gas in storage now stands at 2,571 Bcf, which is 144 Bcf below last year and 111 Bcf under the five-year average. While this shortfall has provided some support, traders appear more focused on forward-looking factors, such as production strength and weather trends.

How Is Production Impacting the Market?

U.S. natural gas production remains strong, counteracting recent spikes in consumption. Output has consistently outpaced demand, leading to high storage levels despite the recent large withdrawal. With no major supply disruptions, traders are now watching how quickly inventories rebuild ahead of the spring shoulder season.

LNG exports have been steady, but they haven’t absorbed enough excess supply to shift market sentiment. Meanwhile, European gas prices remain elevated due to lower inventories and supply risks, but the U.S. market continues to be driven primarily by domestic fundamentals.

Will Weather Drive Another Demand Spike?

Weather remains the key driver for near-term demand, and forecasts continue to suggest mild conditions will limit natural gas consumption in the coming weeks. While recent cold fronts in the Midwest and Northeast have temporarily boosted demand, they have not been strong enough to offset the broader bearish outlook.

Without a significant drop in temperatures, demand is unlikely to rise meaningfully, and storage levels will likely remain comfortable heading into spring.

What’s the Outlook for February?

The market remains fundamentally weak, with steady production and easing demand preventing any sustained upside momentum. Even with a large storage withdrawal, sentiment remains bearish, and traders are preparing for a slow demand period unless weather surprises to the upside.

Without a prolonged cold snap, natural gas fundamentals suggest a soft market ahead, with ample supply limiting the impact of short-lived weather-driven demand spikes.

Technically, last week’s downside momentum and sharply lower trade, has put the market in a position to test the key retracement zone at $2.932 to $2.675. What for a technical bounce on the first test of this area, but be prepared for further losses if $2.675 fails as support.

More Information in our Economic Calendar.