Natural Gas News: Market Rallies Ahead of EIA Report as Weather Models Add HDDs

Natural Gas Futures Edge Higher After Multi-Month Low on Short-Covering

Natural gas futures are edging higher at the mid-session on Wednesday after hitting a multi-month low the previous session. The price action suggests short-covering and position-squaring is taking place ahead of Thursday’s U.S. Energy Information Administration’s (EIA) weekly storage report.

Colder trends in the overnight weather forecasts are also contributing to the early gains as traders expressed some relief that winter may return to its seasonal cold weather patterns. Weather models added 3-10 HDDs overnight. However, the big news is that forecasters kept late January cold still intact.

At 17:25 GMT, February Natural Gas futures are trading $3.518, up $0.168 or +5.01%.

Weather Forecasts Show Cold Pattern Arriving Mid-January

NatGasWeather said early Wednesday that overnight data “forecasts a colder US pattern arriving into the northern half of the US Jan 17-22.”

For January 7 to 13, the service sees warmer than normal temperatures this week then some lingering cold near the Canadian border and across the central and eastern US. “Overall, Very Light demand through Saturday, then Moderate Sunday into Monday.”

EIA Storage Report: 109 Bcf Drawdown Expected Thursday

On Thursday, the EIA will report storage data for the week-ending January 2, 2026. It is expected to show a 109 Bcf drawdown. Last week, the EIA report was bearish as natural gas inventories for the week-ending December 26 fell by 38 Bcf, a smaller draw than the market consensus of 51 Bcf and much smaller than the 5-year weekly average draw of 120 Bcf.

As of December 26, natural gas inventories were down 1.1% y/y and were up 1.7% above their 5-year seasonal average, signaling ample natural gas supplies.

As of January 4, gas storage in Europe was 60% full, compared to the 5-year seasonal average of 73% full for this time of year.

Technical Analysis: New Minor Bottom Forms at $3.324

Technically, the main trend is down, but a new minor bottom has formed at $3.324. The new minor range is $4.176 to $3.324, making its 50% level at $3.750 the new upside target.

While the short-term picture indicates a short-covering rally is possible, the longer-term picture is decisively bearish.

The main trend resistance is the swing top at $4.176. Additional resistance is the 50-day moving average at $4.102 and the 200-day moving average at $4.315. The longer-term 50% level at $4.173 is another potential barrier.

Market Outlook: Polar Dome Needed to Drive Sustained Rally

Looking ahead, traders will be watching Thursday’s EIA report to see if the storage surplus flips to storage deficit. A deficit could underpin the market and fuel some short-covering. This news may be enough to drive prices into the first resistance pivot at $3.750.

It’s going to take a lingering polar dome to drive prices to the $4.103 to $4.315 resistance and perhaps a polar vortex to overcome it. Cold shocks just aren’t going to do it.

More Information in our Economic Calendar.