US EIA data showed a natural gas storage change of -249B for the week dated 6 February. The market expectation was -256B.
The reported draw was 7B smaller than forecast. This indicates less gas was taken from storage than expected.
Storage Report Implications
The natural gas storage draw of 249 billion cubic feet was smaller than the market anticipated, signaling weaker-than-expected demand for the first week of February. This suggests a looser supply-demand balance, which is typically bearish for prices. We see this putting immediate downward pressure on the March and April futures contracts.
Current inventory levels support this view, with total working gas in storage now at 2,341 Bcf. This is a significant 235 Bcf above the five-year average for this time of year, providing a substantial cushion against any supply disruptions. This supply glut limits the potential for any significant price rallies in the near term.
Moreover, U.S. dry gas production remains robust, hovering near a record 106 Bcf per day. This high output, combined with recent forecasts from NOAA predicting warmer-than-normal temperatures across the eastern half of the country for the next 6-10 days, will likely further suppress heating demand. We should therefore consider strategies that benefit from flat or falling prices.
Given these conditions, we anticipate traders will be selling call options or establishing bear put spreads to capitalize on expected price weakness. However, we must remain aware of strong LNG export demand, with feedgas flows to terminals holding near 14 Bcf/d, which provides a solid base of support. A sudden geopolitical event impacting global LNG flows could quickly reverse the current trend.
Risk And Positioning Considerations
We have to remember the volatility we saw during the winter of 2025, when a brief but intense cold blast caused a sharp price spike that caught many short positions off guard. For this reason, maintaining some exposure to long positions through cheap, out-of-the-money call options could serve as a valuable hedge. A sudden shift in the late-February weather pattern remains a key risk.
