Natural gas prices rose sharply in January, averaging $7.72 per million British thermal units (MMBtu), as cold weather increased heating demand, reduced production, and led to record storage withdrawals during Winter Storm Fern.
The drawdown for the week ending January 30 was the largest weekly net withdrawal recorded in the history of EIA’s Weekly Natural Gas Storage Report.
In the February Short-Term Energy Outlook (STEO), the U.S. Energy Information Administration (EIA) now forecasts U.S. natural gas inventories to end the withdrawal season in late March at less than 1.9 trillion cubic feet. This is 8% below previous forecasts, prompting the forecast for the Henry Hub spot price for February and March to be 40% higher than last month’s STEO.
"Winter Storm Fern caused significant short-term pressure on natural gas markets, but we expect higher prices in the near term will increase drilling, resulting in higher production later this year and helping to replenish storage," said EIA Administrator Tristan Abbey. "Ultimately, this will result in lower natural gas prices next year than we had forecast. Our updated forecast anticipates Henry Hub prices will average $4.30/MMBtu in 2026 and $4.40/MMBtu in 2027, 5% lower than our January forecast."
Other key takeaways from the February STEO are below. (TL;DR)
- Venezuela: The evolving situation in Venezuela remains a key uncertainty in our forecast for oil production and exports. In January, Venezuela’s crude oil exports began to recover following December’s oil blockade and sanctions, as trading companies received general licenses to transport Venezuela’s oil, according to industry reports. Much of this oil was moved to Caribbean storage terminals. Expanded U.S. licenses are expected to restore production to pre-blockade activity by mid-2026.
- Global oil prices: The Brent crude oil price averaged $67 per barrel (b) in January, the highest since September 2025. Prices rose because of weather-related disruptions and escalating tensions with Iran. EIA expects these factors to be short term and forecasts oil prices to decline in 2026 as global oil production exceeds global oil demand, leading to higher oil inventories. Global inventories are expected to continue increasing at a slower pace in 2027. EIA forecasts the Brent crude oil price will average $58/b in 2026 and $53/b in 2027.
- Natural gas production: Severe winter weather across the United States led to a 3% decline in U.S. natural gas production from December to January. However, EIA expects most of this production to be back online in early February. By the second half of 2026, EIA expects production to increase as new pipeline capacity comes online in the Permian Basin and producers raise drilling activity in response to higher prices earlier in the year. Overall, U.S. dry natural gas production in the forecast increases by 2% in 2026 and by 1% in 2027.
- Electricity generation: Higher electricity demand in the forecast reflects increased economic activity and growth in data centers, primarily in Texas and the mid-Atlantic regions. EIA expects that most of this demand will be met by increased renewable electricity generation.
- Coal markets: EIA raised the forecast for total U.S. coal consumption after coal-fired power plants increased generation to meet peak electricity demand during recent cold weather. In January, power plants in the United States used 43 million short tons of coal, which is 10% higher than estimated in the January STEO. This increase was supported by a 7% rise in U.S. electricity consumption from December to January.
