US natural gas futures tumbled to around $3.02 per MMBtu, marking their lowest level in four months, as traders reacted swiftly to forecasts for above-average temperatures across central and southern regions of the United States. The sharp move underscores how sensitive the market remains to short-term weather shifts, even as longer-term supply-demand fundamentals appear comparatively tight.

The decline, which saw prices briefly dip to $2.98 per MMBtu on February 16 — down nearly 8% in a single session — came amid thin liquidity during the Presidents’ Day holiday. Such conditions can exaggerate price swings, particularly in energy markets that are heavily influenced by algorithmic and weather-driven trading models.

Weather Overwhelms Short-Term Demand Expectations

According to NOAA projections, warmer-than-normal conditions are expected over the next two weeks, reducing anticipated heating demand. That outlook sharply contrasts with January’s winter storm, which propelled the March contract to a three-year high as freezing temperatures boosted consumption and temporarily disrupted supply.

Natural gas markets are inherently seasonal, and even incremental shifts in temperature forecasts can rapidly alter demand projections. With heating demand easing, speculative length built during colder weeks has been unwound. For traders, this dynamic reinforces how near-term pricing is often dictated more by meteorological models than by structural supply constraints.

Settlement and full trading volumes are expected to normalize following the holiday, with storage data and updated weather forecasts likely to dictate the next directional move.

Inventories and LNG Exports Offer Structural Support

Despite the sharp monthly decline — with prices down more than 23% over the past month and over 25% year-on-year — the underlying fundamentals remain more constructive than the headline suggests. US working gas inventories are approximately 130 billion cubic feet below the five-year average, indicating tighter-than-normal storage conditions heading into the shoulder season.

At the same time, US liquefied natural gas exports remain near record levels. Since overtaking Australia and Qatar in 2023 to become the world’s largest LNG exporter, the United States has seen sustained structural demand from Europe and Asia, particularly amid ongoing geopolitical disruptions tied to Russia’s energy flows.

The Henry Hub benchmark, which underpins futures pricing, reflects not only domestic heating demand but also global trade dynamics. As international gas prices fluctuate, US cargoes remain a key balancing mechanism in the global energy market.

Volatility at the Intersection of Weather and Global Demand

The recent slide highlights a recurring tension in natural gas markets: short-term weather sensitivity versus medium-term supply tightness. While warmer forecasts may ease immediate demand pressures, low inventories and resilient LNG exports provide a floor that could limit further downside.

For investors and energy-sensitive sectors in both the US and Israel — where LNG-linked pricing increasingly influences electricity markets — the key question is whether spring demand remains subdued or whether unexpected cold snaps or export surges reintroduce upward pressure.

Looking ahead, storage reports and updated NOAA projections will be pivotal. Should inventories draw down faster than expected, or if export volumes accelerate further, the current correction may prove temporary. Conversely, sustained mild weather could keep prices rangebound or slightly pressured through the transition into summer cooling season.