Natural gas prices collapsed to a 13-week low on Thursday after the Energy Information Administration reported a storage withdrawal that came in dramatically below expectations, suggesting the market may be better supplied than traders had anticipated heading into the final weeks of winter.

February natural gas futures settled at $3.07 per million British thermal units (MMBtu), down 6.2% on the day and the lowest close since mid-October. The contract had been trading above $5.00 per MMBtu as recently as early January, marking a stunning 38% decline in just over two weeks.

The Storage Surprise

The EIA reported that natural gas inventories declined by just 71 billion cubic feet (bcf) for the week ending January 10—a withdrawal that fell dramatically short of the 95 bcf consensus estimate. The draw was also well below both last year's 132 bcf withdrawal and the five-year average of 124 bcf for the same week.

"This was an unequivocal miss," said Eli Rubin, senior energy analyst at EBW Analytics Group. "The market was positioned for tighter balances heading into the back half of January, and this report completely upends that narrative."

Working gas in storage now stands at 2,892 bcf, which is 234 bcf below the year-ago level but still 38 bcf above the five-year average. The relative comfort of that storage position has weighed heavily on prices.

Weather Whiplash

The dramatic swing in natural gas prices over the past month reflects the market's extreme sensitivity to weather forecasts at this time of year. In late December and early January, forecasters had projected a prolonged cold snap that would send heating demand surging across much of the continental United States.

Those forecasts have since moderated substantially. The EIA has lowered its Henry Hub price forecast for the first quarter of 2026 to an average of $3.38 per MMBtu from $4.35 per MMBtu last month, citing expectations for milder-than-normal January temperatures.

"Small changes in forecasts are causing big price moves, showing how sensitive the market is. Weather is the key driver of short-term natural gas prices."

— EIA Short-Term Energy Outlook, January 2026

Current weather models do show colder-than-normal temperatures expected across much of the US through January 29, with the coldest stretch anticipated around January 18-20. However, the intensity of the cold has been consistently downgraded in recent model runs.

Supply Dynamics

On the supply side, domestic gas production has eased slightly but remains robust. Production averaged 109.3 bcf per day in January, down modestly from December's record levels but still historically elevated.

The steady production comes despite natural gas prices that are now well below the $4.00 per MMBtu level many analysts consider necessary to incentivize new drilling in prolific shale basins like the Permian and Haynesville.

"Producers have been remarkably disciplined, but you have to wonder how long that lasts if prices stay in the low $3s," said Dennis Kissler, senior vice president of trading at BOK Financial. "At some point, the economics start to bite."

LNG Export Demand Provides a Floor

One factor preventing an even steeper decline in prices is the continued strength of liquefied natural gas (LNG) exports. US LNG export capacity has expanded significantly over the past year, with several new facilities ramping up operations.

The EIA expects that growth in LNG demand will outstrip production growth in the coming years, ensuring price gains over the medium term even if short-term volatility persists. The agency forecasts Henry Hub prices will average around $3.50 per MMBtu for the full year 2026 before rising sharply to just under $4.60 per MMBtu in 2027.

Trading Implications

For traders and investors, the recent price action offers several takeaways:

  • Weather remains king: At this time of year, small changes in temperature forecasts can produce outsized price moves
  • Storage is adequate: The relatively comfortable storage position provides a buffer against extreme price spikes even if cold weather materializes
  • Production discipline matters: Watch for any signs that low prices are finally forcing producers to curtail output
  • LNG creates a floor: Export demand should prevent prices from falling to the sub-$2 levels seen in previous oversupply periods

The next major catalyst for natural gas prices will be the EIA's storage report on January 23, followed by the release of updated weather forecasts for February. Until then, prices are likely to remain volatile and highly responsive to any shifts in the temperature outlook.

For consumers, the silver lining in the natural gas selloff is the potential for lower heating bills if prices remain depressed through the balance of winter. For producers and investors in the energy sector, however, the sharp pullback serves as a reminder of just how quickly sentiment can shift in commodity markets.