Natural Gas News: Forecast Shows Cold Snap Ahead, But Inventory Surplus Caps Gains

Natural Gas Futures Hover Near $3.00 as Storage and Weather Tug-of-War

Natural gas futures are lower but nearly flat on Friday as traders weigh growing storage concerns against lingering cold worries. The storage concerns are capping gains, while the lingering worries about the weather are providing some support. The selling pressure seems to subside when the market approaches the psychological $3.00 level and the $2.991 multi-month bottom.

At 16:32 GMT, February Natural Gas futures are trading $3.080, down $0.048 or -1.53%.

Bearish EIA Storage Report Shows Smaller-Than-Expected Draw

Both short-term and long-term storage views are weighing on prices. Thursday’s weekly Energy Information Administration (EIA) storage report was bearish, as natural gas inventories for the week ended January 9 fell by 71 Bcf, a smaller draw than the market consensus of 91 Bcf and well below the 5-year average draw of -146 Bcf.

As of January 9, natural gas inventories were up 2.2% year over year and were 3.4% above their 5-year seasonal average, signaling ample natural gas supplies, according to EIA data.

Long-Term Outlook Points to Pressure Through 2026

Long-term views were also bearish. Earlier in the week, the EIA reported that they expect the U.S. benchmark natural gas spot price at the Henry Hub to decrease about 2% to just under $3.50 per MMBtu in 2026 before rising sharply in 2027 to just under $4.60 per MMBtu.

Cold Weather Forecast Provides Glimmer of Support

The weather could be helping to support the market, with a new forecast from Atmospheric G2 that called for a shift to cold over parts of the central and eastern U.S. January 20-24.

Technical Picture: Support Base Forming at $3.00 Level

Technically, traders may be attempting to build a support base around the $3.00 level. However, if $2.991 fails as support, prices could reach $2.770.

Swing tops at $3.499 and $3.634 are immediate resistance, but a successful test of these levels could trigger a short-covering rally into the 50-day moving average at $3.987 and the 200-day moving average at $4.254. Sellers are expected to return if prices reach the moving averages.

Short-Term Outlook: $3.00 Reaction Key to Friday’s Direction

Looking ahead, trader reaction to $3.00 will determine the direction into the close. The lack of fresh shorting may prompt short-covering, allowing the market to rally without strong buying pressure. The only way I see actual buyers returning is if the cold weather intensifies, spreads over a larger area, and lasts longer than previously forecast.

Until the market sustains a rally over the 200-day moving average, traders are going to remain in “sell the rally” mode.

More Information in our Economic Calendar.