Strong Demand Forecasts for Natural Gas Boost Prices 5%
The price of natural gas futures for the United States is down slightly after a strong surge on Monday and Tuesday morning.
Quick overview
- U.S. gas futures rose 5% in early trading, following a 7.6% gain on Monday, but dipped slightly to $3.33/MMBtu by midday on Tuesday.
- Record LNG export flows and cold weather forecasts contributed to a four-day high in gas prices, although a market correction led to a minor pullback.
- Natural gas production in the U.S. is slightly down from December but remains strong, with expectations of colder weather boosting demand and prices.
- Investors should closely monitor weather forecasts, as any changes could significantly impact gas futures prices.
In early morning trading, U.S. gas futures rose 5%, riding high from Monday’s 7.6% gains, but midday trading brought prices down from $3.37 to $3.33/MMBtu on Tuesday.
Record flows for LNG export plants across the United States helped spike gas prices on Monday and Tuesday morning, and cold weather forecasts ensured that prices reached a four-day high. However, prices settled later in the day and dipped slightly as the market adjusted to the sky-high gains.
Water models are predicting very cold days to come that are frostier than normal, creating a bullish market that could continue for weeks to come. At the same time, exports of natural gas are at record highs and gas production is letting up in some areas of the United States.
Gas Production Slows but Market Heats Up
Production of natural gas in the United States is around 109.4 bcfd for January so far, and that is lower than December’s 109.7 but still strong. There are colder days ahead, according to weather forecasters, with the coldest weather expected from January 18th-20th.
Further forecasts estimate that the week after will be even colder, with new weather models predicting a colder winter than normal. That should boost gas demand and keep the market prices rising. The recent January high for $3.60 should be easily topped as the month progresses, and February could be even better for the market.
Gas prices slipped on Tuesday afternoon in a market correction that was only minor. The slight pullback should not be enough to derail the upward momentum that natural gas futures are enjoying right now. Both Henry Hub and United States Natural Gas Fund (UNG) climbed this week and should move higher as the weekend approaches.
The newest storage report shows that exports are high and injections are relatively low. Overall supply is dropping after elevated levels throughout much of 2025, so investors should expect prices to rise mostly unimpeded by over storage fears.
Gas prices have been driven in the U.S. this year by weather forecasts, so investors should be watching those closely. If the forecast changes even slightly, expect the price of gas futures to shift quickly to compensate. The market is skittish about warm weather right now, since December was unusually warm and had weeks of relatively warm weather that kept gas prices down until late in the month.
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