We've updated the weekly chart to reflect the current gap higher opening.
A prolonged Arctic blast is driving heating demand across much of the United States. Temperatures have plunged into the negative teens to 20s in northern regions, with even southern states like Texas seeing overnight lows in the 10s to 30s. This trend is forecast to persist into late January, with another cold front expected between January 19-22, ensuring sustained pressure on natural gas supplies.
These frigid conditions have already pushed daily heating demand to record highs, with analysts expecting continued "High to Very High" consumption levels. The West Coast remains the exception, experiencing milder temperatures that are unlikely to offset the national spike in demand.
Natural gas exports, particularly LNG shipments, are playing a pivotal role in the current bullish outlook. Record-breaking U.S. LNG exports to Europe have surged as supply concerns mount following disruptions, including the termination of Russia's gas transit agreement with Ukraine and outages at Norway's Hammerfest LNG terminal. This unprecedented demand has exacerbated domestic inventory concerns, as colder U.S. weather tightens the supply-demand balance.
With subdued production levels, the U.S. is increasingly relying on its storage reserves to meet both domestic and international demand, amplifying the impact of rising LNG exports on market dynamics.
The latest report from the U.S. Energy Information Administration (EIA) revealed a withdrawal of 40 Bcf, aligning with expectations but signaling that storage levels, currently at 3,373 Bcf, could rapidly decline. While still 207 Bcf above the five-year average, the sustained cold and rising exports threaten to eliminate this surplus. Analysts warn that any additional Arctic systems could further tighten supply, creating conditions for a potential supply squeeze.
Traders are closely watching key support at $3.766, with prices poised to test $4.201 if bullish momentum holds. A breakout above these levels could push futures toward $4.838, while any unexpected moderation in weather could temper gains.