U.S. natural gas futures experienced significant downward pressure on Monday, with the March NYMEX Henry Hub contract declining more than 6% to trade near $3.04 per million British thermal units. The market retreat reflects growing concerns about warmer weather patterns reducing heating demand as the winter season progresses.
Storage Data and Weather Outlook Weigh on Prices
The latest report from the U.S. Energy Information Administration revealed working gas in storage stood at 2,214 billion cubic feet for the week ended February 6. This followed a withdrawal of 249 Bcf, which came in below the 256 Bcf draw anticipated by analysts surveyed by Investing.com. The smaller pull from inventories suggests weaker consumption than market participants had projected.
According to Eli Rubin of EBW Analytics Group, signs of "faltering demand" emerged as the holiday weekend approached. Rubin noted that the March contract briefly reached $3.316 before retreating on what he described as a "bearish" storage surprise. He identified cold air moving from Western Canada as the primary factor supporting prices in the near term, warning that without this meteorological support, "sub-$3.00 per million British thermal units may be in play."
Volatile Winter Creates Extreme Price Swings
This winter has delivered dramatic price fluctuations for natural gas, swinging from scarcity to surplus conditions within weeks. The Energy Information Administration reported Henry Hub spot prices averaged $7.72 per MMBtu in January, surging to a daily record of $30.72 on January 23 during Winter Storm Fern. However, the market reversed sharply on February 2 when the prompt-month contract recorded its steepest single-day decline in three decades following revised warmer forecasts.
These price movements have ripple effects across multiple market segments tied to Henry Hub pricing, including liquefied natural gas export margins and exchange-traded products tracking the front end of the U.S. futures curve.
UNG ETF in Focus as Market Reopens
The United States Natural Gas Fund (UNG), one of the most actively traded U.S.-listed gas funds by volume, closed at $12.44 on Friday, representing a modest gain of approximately 0.1%. Trading volume reached about 8.8 million shares. This marked the final closing price investors observed before the Presidents Day holiday shuttered U.S. stock and bond markets, with trading set to resume Tuesday.
UNG is designed to track daily price movements linked to Henry Hub natural gas futures, making it a key instrument for investors seeking exposure to commodity price fluctuations without direct futures market participation.
Market Attention Turns to Upcoming Data and Forecasts
Traders are closely monitoring two critical factors that will likely determine near-term price direction: Thursday's upcoming storage report from the EIA and updated temperature projections for late February and early March. These elements will help establish whether the $3 price level will hold or whether further declines are imminent.
The next official storage data release is scheduled for February 19, providing market participants with fresh inventory information to assess the supply-demand balance. Meanwhile, weather models remain particularly volatile during this transitional period between winter and spring, with forecasts capable of shifting dramatically within short timeframes.
Market veterans recognize that betting heavily on any single weather prediction has proven costly this season. A late-month cold snap or production freeze-offs that slow output could quickly tighten the supply picture, especially with exports continuing to represent a substantial component of U.S. natural gas demand.
The current price weakness reflects a market adjusting to reduced immediate heating needs, but the fundamental volatility of natural gas during winter months means conditions could change rapidly with shifting weather patterns.
