U.S. natural gas futures extended their decline in Tuesday's pre-market trading, pressured by updated meteorological projections indicating a warmer-than-expected conclusion to February. The March contract traded at $3.115 per million British thermal units (mmBtu), marking a drop of 2.3 cents, or 0.7%. This movement follows a significant 8% sell-off during the prior session, as traders reassessed heating demand forecasts for the remainder of the winter season.
Weather Models Drive Price Action
The primary catalyst for the recent weakness is a shift in weather outlooks. Forecasts now predict above-average temperatures across much of the United States through February 23rd. This has led analysts to revise heating degree day (HDD) estimates downward, from approximately 374 to 358. Such a reduction directly implies lower consumption by residential and commercial consumers for space heating, a fundamental bearish signal for the market.
Concurrently, supply and demand metrics are under close scrutiny. Production in the Lower 48 states has averaged 106.99 billion cubic feet per day (bcfd) so far in February, according to data from LSEG. On the demand side, total U.S. gas consumption—which includes exports—is projected to decline from 142.5 bcfd this week to around 130 bcfd in the following week. Notably, feedgas volumes to U.S. liquefied natural gas (LNG) export facilities have shown resilience, recently edging higher to 18.3 bcfd.
Storage Data Looms Large
Market participants are now turning their attention to the upcoming weekly storage report from the U.S. Energy Information Administration (EIA), scheduled for release on Thursday, February 12, at 10:30 a.m. Eastern Time. This report will provide a critical snapshot of inventory levels and the pace of withdrawals from storage. The last reported figure, for the week ending January 30, showed working gas inventories standing at 2,463 billion cubic feet (bcf). A smaller-than-expected draw this week would reinforce the narrative of weakening demand and could exert further downward pressure on prices.
The global LNG market remains a key variable for U.S. exporters. While some analysts anticipate a modest increase in Chinese LNG imports for 2026 due to rising global supply, competitive pressures are a significant concern. "Even if prices fall in 2026, LNG still can’t compete with domestic or imported pipeline gas," noted Xiong Wei, an analyst at Rystad Energy. This sentiment was echoed by Yuanda Wang of ICIS, who suggested that the extent of demand stimulation from lower prices is still debatable, potentially capping upside for spot LNG and, by extension, U.S. export volumes.
Market dynamics remain highly sensitive to short-term weather disruptions. Historical precedents, such as the price spikes witnessed during January's cold snap, illustrate this volatility. Equinor's CFO, Torgrim Reitan, highlighted this in a recent interview, noting the company sold some U.S. gas at prices exceeding $100 per mmBtu into the New York market during that period by maintaining a portion of its production linked to spot pricing.
Looking ahead, the risk for bullish traders is clear. A continuation of the warm weather pattern, coupled with steady production and any stumbles in LNG export flows, could lead to smaller storage draws as the winter season winds down. This scenario would likely build downside pressure on prices as the market transitions into the shoulder season—the period between peak winter heating and summer cooling demand. Traders will continue to monitor daily output data, LNG feedgas rates, and, most importantly, the Thursday storage report and subsequent late-February forecast updates for directional cues.
