The Natural Gas (NG) market concluded the final full trading week of 2025 with a decisive bullish turn, as the January 2026 contract reclaimed ground following a mid-month retreat. While global demand growth slowed slightly throughout 2025 due to macroeconomic uncertainties, the year-end “Santa Claus rally” was ignited by a sudden shift toward colder temperature projections for the North and West. This price action occurs against a backdrop of record U.S. production and a shifting geopolitical landscape that has placed energy security at the forefront of investor concerns.

Weather Volatility and the January Rebound

The primary catalyst for Friday’s 3.11% gain was a revision in short-term meteorological models. Atmospheric G2 reported a shift toward colder-than-normal conditions for the period of December 31 to January 4, fueling a spike in space heating demand. This rally was further supported by the rescheduling of the EIA inventory report to December 29, which led traders to preemptively price in a massive withdrawal from storage. Despite current U.S. production hovering near a record 113.2 Bcf/day, the anticipation of a severe early-winter freeze has momentarily outweighed the bearish impact of high output.

Israel’s Strategic Ascent in the Global Hub

For investors in Israel and global partners, the week’s most significant strategic development was the approval of the largest export deal in Israeli history. Prime Minister Netanyahu announced a record NIS 112 billion ($34.7 billion) agreement to deliver gas to Egypt over the next 15 years through Chevron. With Israeli gas already accounting for roughly 15-20% of Egypt’s consumption, the expansion of the Leviathan and Tamar fields positions the Eastern Mediterranean as a pivotal alternative for a European market seeking to diversify away from Russian piped gas by the end of 2026.

The Coming “Super Cycle” and 2026 Market Dynamics

As we look toward the first quarter of 2026, the Capital market is preparing for what analysts describe as an LNG “Super Cycle”. A massive wave of new supply is expected to hit the market, with global LNG capacity set to rise by about 7% next year, outpacing demand growth of 2%. While this surge may lead to a softening of benchmark prices like JKM and TTF, it is expected to ignite demand in price-sensitive regions of Asia. Furthermore, EU gas storage sites currently stand at approximately 70% full, significantly lower than the 78% average for this time of year, suggesting that European demand for Atlantic cargoes will remain a critical floor for prices.

The outlook for Natural Gas in early 2026 remains tied to the delicate balance between weather-driven demand and the impending supply wave. While the Henry Hub spot price is projected to average around **$4.00/MMBtu** next year, the market remains highly vulnerable to geopolitical disruptions in the Red Sea and potential shifts in U.S. trade policy. Key risks to monitor include the pace of Permian pipeline expansions and whether a milder-than-normal early 2026 will lead to a rapid inventory rebuild. Investors should watch the $4.30 winter resistance level; a sustained break above this could signal a tighter-than-expected heating season before the mid-2026 supply influx.