U.S. and European natural gas markets started the week on the defensive, signaling a shift in sentiment after weeks of weather-driven volatility. Futures prices slid as forecasts turned milder, easing immediate heating demand and encouraging traders to unwind positions built around late-winter supply fears. The pullback is notable not only for its size, but for what it suggests about how quickly weather risk can be repriced when fundamentals stabilize.

U.S. Prices Slide as Weather Premium Deflates

In the U.S., natural gas futures on the New York Mercantile Exchange fell more than 8%, pushing prices down to roughly $3.14 per million British thermal units. The decline reflects a combination of softer demand expectations and a recovery in production that has brought output close to pre–winter storm levels. After weeks of supply anxiety tied to extreme cold and infrastructure disruptions, the market is now adjusting to a calmer operational backdrop.

Still, the selloff does not imply that risks have vanished. Storage levels have recently flipped into a deficit relative to the five-year average, and upcoming inventory data is expected to show that gap widening further. That dynamic leaves prices more sensitive to any surprise cold snap in the final stretch of winter. Strategists note, however, that seasonality is becoming a headwind. As the market approaches March and prepares for the rollover into the April contract, the influence of cold-weather demand typically diminishes, reducing the justification for elevated winter premiums.

Europe Mirrors the Retreat Despite Tight Inventories

A similar pattern is playing out in Europe, where natural gas prices declined even as storage remains well below normal. The Dutch TTF benchmark dropped nearly 8% to around €32.9 per megawatt-hour, retreating from levels above €40 seen late last month. According to Gas Infrastructure Europe, inventories across the European Union are hovering near 37% of capacity, far under the seasonal average and a reminder that the region is still structurally tight.

The recent price easing reflects fading weather fears rather than improving storage. Warmer temperatures have reduced heating demand expectations, while concerns that a major U.S. winter storm could disrupt LNG exports have receded. For now, traders appear willing to look past low inventories, betting that the worst of winter demand is behind them unless a fresh cold shock emerges.

Geopolitics and Volatility Still Lurking

Beyond weather, geopolitical developments remain a latent source of volatility. Market participants are closely watching U.S.-Iran negotiations, aware that any escalation or disruption to global energy flows could quickly tighten balances and reverse recent losses. This backdrop is keeping risk managers cautious, even as prices pull back.

From a behavioral perspective, the recent moves highlight how quickly energy markets can swing when sentiment shifts from scarcity to normalization. After a period of aggressive positioning around winter risks, the current retreat suggests traders are reducing exposure and recalibrating for a more typical late-season environment.

What Comes Next for Gas Markets?

Looking ahead, natural gas prices are likely to remain highly reactive to incremental changes in weather forecasts, storage data, and geopolitical headlines. While seasonal factors argue for softer demand into spring, thin inventories mean complacency could be costly. For investors and commercial hedgers alike, the coming weeks will test whether the market has truly moved past winter stress, or whether one last cold spell can reignite volatility.