Cold Weather Drives Short-Term Gains, But Production Remains a Threat
A new cold spell sweeping across the U.S. is fueling increased heating demand, pushing natural gas futures up 2.5% to $3.391 per MMBtu. Analysts at EBW Analytics highlight that this combination of supportive weather, storage deficits, and bullish technicals could sustain upward pressure in the short term.
However, rising production levels remain a concern. Over the weekend, U.S. natural gas output hit fresh all-time highs, threatening to undermine any extended price rally. With winter drawing to a close, traders are closely monitoring whether demand strength can outpace supply growth.
European Gas Prices Surge as Inventories Deplete
Across the Atlantic, European natural gas prices have surged to their highest levels in two years, with the Dutch TTF benchmark jumping 4.5% to €58.25 per megawatt hour. A sharp drop in temperatures across the U.K., Germany, and France is accelerating withdrawals from storage, which now sits at 49% full—well below the 67% level from this time last year.
The concern for European traders is that low storage levels could complicate restocking efforts ahead of next winter. Gas contracts for summer delivery are currently priced higher than winter contracts, limiting the incentive for buyers to store fuel at lower prices. This could tighten supply heading into the colder months, keeping European gas markets volatile.
Massive Storage Draw Reflects Strong Winter Demand
Recent cold weather in the U.S. led to the fourth-largest weekly natural gas withdrawal on record, according to the EIA. For the week ending January 24, inventories dropped by 321 Bcf—nearly 70% above the five-year average draw for that period.
The South-Central region saw a particularly sharp drop, with storage levels declining by 136 Bcf, while the East and Midwest also reported double-digit percentage declines. With total withdrawals in January nearing 1,000 Bcf, storage inventories have now flipped from 6% above the five-year average at the start of the heating season to 4% below it.