Natural Gas Prices Rally on Winter Storm Quotes: February Surge Reaches 3-Year Highs

February Nymex natural gas (NGG26) closed Friday with a notable +0.230 gain, representing a +4.56% increase. While prices remained slightly below Thursday’s 3-year nearest-futures high, the week delivered a powerful rally driven entirely by one factor: an approaching historic winter storm that threatens to reshape US energy markets. Natural gas quotes have surged more than 60% over the past week as forecasters predict an Arctic cold front will sweep into the US, potentially disrupting gas production and dramatically amplifying heating demand.

Arctic Weather Front Drives Heating Demand and Price Quotes Upward

According to AccuWeather’s latest projections, a massive Arctic cold front will descend across the US this weekend, extending as far south as Texas and bringing sub-normal temperatures to more than 150 million people across 24 states. This rare winter event is precisely the type of weather shock that sends energy prices sharply higher. The cold surge increases heating demand dramatically while simultaneously threatening gas production infrastructure. In response to the approaching storm, Texas Governor Abbott has already issued disaster declarations for more than half the state’s counties.

The winter storm quotes market is pricing in significant near-term price support. Rising heating demand typically boosts natural gas consumption, which can rapidly deplete storage inventories. Combined with production disruptions from cold weather, the supply-demand equation shifts decisively in favor of higher prices.

Supply Concerns: How Freezing Temperatures Threaten US Production

The real risk from this winter storm lies in US natural gas production. Texas hosts key gas production facilities, but the state’s energy infrastructure remains less resilient to extreme cold compared to northern states. Freezing temperatures can cause water to freeze inside gas pipelines, creating temporary production outages and reducing output. The EIA significantly cut its 2026 dry natural gas production forecast to 107.4 bcf/day, down from the previous estimate of 109.11 bcf/day.

Currently, US (lower-48) dry gas production sits near record levels at 109.6 bcf/day, representing an 8.7% year-over-year increase according to BNEF data. However, this production surge could face headwinds from storm-related disruptions. Meanwhile, Lower-48 state gas demand on Friday totaled 126.0 bcf/day, showing a slight 0.5% year-over-year decline. LNG export activity remains robust, with net flows to US LNG export terminals reaching 19.8 bcf/day, up 5.3% week-over-week.

Market Inventory Levels and Rig Count Signal Continued Pressure

Recent EIA data reveals a paradox in the natural gas market. For the week ended January 16, natural gas inventories fell by 120 bcf—a larger draw than the market consensus of 98 bcf but smaller than the historical 5-year weekly average draw of 191 bcf. As of mid-January, inventories stood 6.0% above year-ago levels and 6.1% above their 5-year seasonal average, suggesting ample supplies remain available.

Yet this inventory cushion provides limited comfort given the severity of the approaching weather. European gas storage presents a starkly different picture: as of January 21, storage facilities were only 48% full, compared to the 62% seasonal average for this time of year, highlighting Europe’s continued vulnerability to supply disruptions.

Baker Hughes reported that active US natural gas drilling rigs remained steady at 122 in the week ending January 23, marginally below the 2.25-year high of 130 rigs reached in late November. Over the past year, rig counts have recovered substantially from the September 2024 low of 94 rigs, indicating sustained industry investment in production capacity.

Weather-Driven Market Dynamics: What Storm Scenarios Mean for Gas Quotes

The winter storm fundamentally reshapes short-term natural gas quotes through multiple channels. Elevated heating demand lifts consumption, while production disruptions constrain supply, creating a bullish squeeze. Storage levels, though elevated on a seasonal basis, may face accelerated drawdowns as demand spikes and production falters.

The electricity market provides a secondary consideration. The Edison Electric Institute reported that US electricity output in the week ended January 10 fell 13.15% year-over-year to 79,189 GWh, a concerning decline. However, the 52-week period showed more resilience, with output rising 2.5% year-over-year to 4,294,613 GWh.

Storm-driven natural gas price quotes will likely remain supported through the immediate forecast period, though the magnitude and duration of price strength depends on the actual severity of production disruptions and the speed of demand normalization once the cold front passes.