Natural Gas News: Market Eyes EIA Storage Report as Winter Demand Boosts Prices

Will the Natural Gas Rally Hold as Cold Weather and Storage Draws Support Prices?

Natural gas futures surged early Thursday as traders positioned ahead of the U.S. Energy Information Administration’s (EIA) weekly storage report. The rally, fueled by a frigid 10-day weather outlook and expectations of a widening storage deficit, has added 25.6 cents over the past three sessions.

Technical levels suggest bullish momentum is intact, with the prompt-month contract breaking above a short-term pivot at $3.505, now acting as key support. If the upside continues, a test of the January 25 high at $4.020 is likely. However, a drop back below $3.505 could attract sellers, pushing prices toward the 50-day moving average at $3.138, which remains a critical support level for the bullish trend.

At 14:05 GMT, Natural Gas Futures are trading $3.733, up $0.168 or +4.71%.

Cold Weather and Storage Draws Keep Prices Elevated

Winter conditions remain a key driver of natural gas prices, with Arctic temperatures expected to persist across northern Europe and parts of the U.S. through late February. NatGasWeather forecasts “high” national demand in the coming week as frigid systems bring subzero temperatures across much of the interior U.S.

Meanwhile, today’s EIA report is expected to show a storage draw of 91-96 Bcf, significantly below the five-year average draw of 144 Bcf. Warmer-than-normal conditions in much of the U.S., excluding the northern regions, and stronger wind energy generation last week have contributed to a smaller-than-expected withdrawal. However, if the reported draw is larger than estimates, it could add further fuel to the current rally.

EU Price Cap Proposal and Russia-Ukraine Talks Shake Global Gas Markets

U.S. gas prices are also reacting to developments in the European market. Reports that the European Commission is considering a price cap to control energy costs have been met with opposition from energy industry groups, which warn of potential market instability.

In a separate development, European gas prices tumbled after reports that the U.S. and Russia have agreed to initiate peace talks regarding the war in Ukraine. A resolution could lead to increased Russian pipeline flows through Ukraine, potentially restoring Europe’s cost competitiveness to pre-crisis levels. Dutch TTF futures fell 6.3% following the news, after briefly trading above 58 euros per megawatt-hour earlier this week.

Market Forecast: Short-Term Bullish, but Watch for Resistance

With cold weather sustaining demand and storage withdrawals tightening supplies, natural gas prices are positioned to climb further. If the market maintains its strength above $3.505, a move toward $4.020 is likely. However, traders should remain cautious, as natural gas markets tend to fade rallies quickly. A weaker-than-expected storage draw or a shift toward milder forecasts could trigger a reversal, bringing the 50-day moving average at $3.138 back into play.

More Information in our Economic Calendar.