Natural gas storage totaled 2,823 Bcf as of Friday, January 23rd, 2026, a net decrease of 242 Bcf from the prior week. Stocks were 206 Bcf higher than last year at this time and 143 Bcf above the five-year average of 2,680 Bcf.
An intense Arctic weather system swept across much of the country last week, yielding historic volatility for natural gas markets. Extreme cold drove heating demand sharply higher. At the same time the severity and geographic span of the cold disrupted infrastructure and production, leading to significant outages and spikes in wholesale prices. The elevated demand colliding with weather-induced supply constraints has been the dominant story marking the beginning of 2026 for U.S. natural gas markets.
Supply impacts were significant. As Arctic air settled over Texas, Louisiana and the Midwest, widespread freeze-offs (occurs when liquids and water in well streams solidify and block gas flows) temporarily shut in production at a record-breaking rate. Estimates showed freeze-offs near 17 Bcf/d at peak, with overall Lower-48 output falling to multi-year lows before beginning a gradual recovery as temperatures eased and wells were brought back online. Ultimately, it drove front-month futures to three-year highs.
In fact, front-month futures more than doubled over several trading sessions, with prices not seen since late 2022. Analysts noted the volatility resulted from the immediate supply/demand imbalance created by the cold snap, rather than a long-term shift in fundamentals. The steep front-month premium over later contracts emphasize the weather-driven nature of the rally.
Some analysts see signs of a possible turnaround as supply recovers and forecasts moderate, suggesting the price overshoot may correct once the cold subsides and production normalizes, with longer-dated futures trading well below the January spikes. This underscores storage levels and supply prospects remain important factors for market equilibrium. With sustained LNG demand and escalating consumption for power burn, fundamentals will shift from fickle weather-driven heating demand to a long-term need to feed data center consumption with affordable power.
Henry Hub spot prices rose by $4.050/Dth from $4.980/Dth last Wednesday, January 21st to $9.030/Dth, week-over-week, according to data from NGI. Likewise, the February contract expired Wednesday at $7.460/Dth. At the same time, March near-term futures rose 19.7 cents to $3.732/Dth over the prior week. Meanwhile, a look at longer-dated futures prices reveal modest price increases and in some cases, declines.
In essence, it's the term used to describe a market characterized by higher near-term prices than later-term costs. It is typical during periods of pronounced, immediate natural gas demand as seen during winter storms. That prices normalize in later contracts suggests analysts anticipate the demand will level off. The increased prices, or fear premium, were more influenced by high demand from the cold and tightened supply from natural gas wellhead freeze offs.
Market confidence in production levels and forecasted demand calms price spikes as weather moderates. Whether this pattern will hold as winter heating demand shifts to consumption used for power generation escalates (cooling and data center power, generally) remains to be seen and is worth watching.
While backwardation can seem complex, recent weather and market activity provide a great example, making it fairly easy to see in the following table:
March settled Wednesday, January 28th at $3.732/Dth down 8.8 cents from Tuesday’s close at $3.820/Dth but up 19.7 cents from the prior week. February moved off the board Wednesday, January 28th, settling the month at $7.460/Dth.
Settled Wednesday, January 28th at $4.370/Dth, up 40.0 cents from the prior week.
The summer forward strip (APR26-OCT26) settled Wednesday, January 28th at $3.867/Dth, up 16.2 cents week-over-week, while the winter forward strip settled at $4.465/Dth, up 22.0 cents from the prior week.
CY26 settled Wednesday at $4.302/Dth, up 40.2 cents from the prior week.
CY27 settled Wednesday at $3.792/Dth, down 1.9 cents from the prior week.
CY28 settled Wednesday at $3.619/Dth, down 6.6 cents from the prior week.