By Jamie Martin
Natural gas markets experienced strong pressure in January as cold temperatures increased heating demand and reduced production. Average prices rose sharply as Winter Storm Fern led to historic withdrawals from U.S. natural gas storage.
Updated energy forecasts now show inventories ending the winter season at lower levels than previously expected. This change reflects reduced supplies caused by extreme weather and strong consumption during peak demand periods.
“Winter Storm Fern caused significant short-term pressure on natural gas markets, but we expect higher prices in the near term will increase drilling, resulting in higher production later this year and helping to replenish storage,” said EIA Administrator Tristan Abbey.
“Ultimately, this will result in lower natural gas prices next year than we had forecast. Our updated forecast anticipates Henry Hub prices will average $4.30/MMBtu in 2026 and $4.40/MMBtu in 2027, 5% lower than our January forecast,” said Abbey.
The record storage withdrawal highlighted how vulnerable energy systems can be during severe winter conditions. Reduced production during the storm added to supply challenges, pushing prices higher across spot markets.
Short-term price forecasts for early 2026 were raised significantly. However, analysts expect higher prices to encourage more drilling activity, which should support stronger production later in the year. Planned pipeline expansions are also expected to improve supply flow from key producing regions.
Over the next two years, natural gas prices are expected to ease as supply increases and storage levels recover. Forecasts indicate moderate average prices through 2026 and 2027, reflecting improved market balance.
Other energy markets show varying trends. Oil prices are expected to decline as global production grows faster than demand. Electricity demand is forecast to increase due to economic growth and expanding data centers, especially in major regions.
Renewable energy sources are expected to supply most of the new electricity demand, while coal use increased temporarily during winter to meet peak power needs.
Overall, the latest energy outlook shows that while weather events can cause sharp short-term disruptions, market responses and increased production help stabilize energy prices over time.
Photo Credit: gettyimages-artqu
Categories: National