U.S. natural gas markets suffered a sharp reversal on Wednesday, with futures tumbling more than 7% to near $3.17 per million British thermal units, approaching their lowest levels since mid-October. The selloff reflects how vulnerable the market remains to export disruptions, even as winter weather forecasts point to colder-than-normal conditions across much of the country. For traders, the message was clear: LNG flows, not temperatures, are setting the tone in the near term.

Freeport LNG Disruption Drives the Selloff

The immediate catalyst for the plunge was a sudden reduction in gas demand from Freeport LNG, one of the largest U.S. liquefied natural gas export facilities. Gas intake at the terminal dropped sharply to around 0.7 billion cubic feet per day on Tuesday, well below its recent average of roughly 1.9 bcfd. That decline reignited concerns that export demand—one of the strongest pillars supporting U.S. gas prices—could prove less reliable than expected.

Although flows showed signs of recovery on Wednesday, rising toward 1.4 bcfd, they remained far below the plant’s full processing capacity of 2.4 bcfd across its three liquefaction trains. The episode underscores how even temporary operational disruptions at major LNG facilities can ripple quickly through U.S. gas pricing.

Weather Support Takes a Back Seat

Under normal circumstances, forecasts calling for colder-than-average temperatures through late January would provide a strong tailwind for natural gas prices by boosting heating demand. Meteorologists continue to project widespread cold across large parts of the United States through January 28, a development that could materially tighten balances later in the month.

However, the market has largely discounted that support for now. Traders appear more focused on export flows, recognizing that LNG demand increasingly rivals domestic consumption as a marginal price driver. Until confidence is restored that facilities like Freeport are operating near normal levels, weather-related optimism may struggle to gain traction.

Supply Trends Offer Only Limited Relief

On the supply side, U.S. natural gas production has edged lower, averaging about 109.4 bcfd in January, down slightly from December’s record high. While the moderation in output helps ease concerns about oversupply, it has not been enough to offset the shock from weaker LNG feedgas demand.

This imbalance highlights a structural shift in the U.S. gas market. Production growth alone no longer guarantees price stability; export reliability has become just as critical. Any hint of disruption can quickly overwhelm otherwise supportive fundamentals.

Prices Still Deep in a Downtrend

Natural gas futures fell to roughly $3.18/MMBtu on January 14, down more than 7% on the day. Over the past month, prices have dropped more than 20%, and they remain over 22% lower than a year ago. The magnitude of the decline reflects how aggressively markets have repriced expectations after last year’s volatility.

Despite occasional rebounds, the broader trend remains fragile. Historically, natural gas has proven capable of extreme swings—ranging from a record high of $15.78 in 2005 to deep cyclical lows—reinforcing its reputation as one of the most volatile major commodities.

What the Market Is Watching Next

Looking ahead, traders will closely monitor gas flows to LNG export terminals, particularly whether Freeport can return to near-full utilization. At the same time, confirmation of sustained cold weather could revive demand expectations and stabilize prices. Until then, natural gas remains caught between supportive winter fundamentals and the ever-present risk of export disruptions—a balance that continues to tilt toward volatility rather than recovery.

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