Natural Gas Market Analysis - January 2026
Market Overview
Natural gas futures have surged by 5.01%, reaching $3.518 after previously hitting a multi-month low. This increase is attributed to short-covering and position-squaring ahead of the upcoming U.S. Energy Information Administration (EIA) weekly storage report.
Weather Impact
Recent weather forecasts indicate a colder pattern arriving in the northern half of the U.S. between January 17-22, which is expected to increase demand for natural gas. The addition of 3-10 heating degree days (HDDs) in the forecasts has contributed to the market's upward movement.
EIA Storage Report Expectations
The EIA is anticipated to report a drawdown of 109 billion cubic feet (Bcf) for the week ending January 2, 2026. This follows a previous report that showed a smaller-than-expected draw of 38 Bcf, which was below market consensus and the five-year average. Current inventories are down 1.1% year-over-year and 1.7% above the five-year seasonal average, indicating sufficient supply levels.
Technical Analysis
From a technical perspective, a new minor bottom has formed at $3.324, with the main trend still downwards. The new range is identified between $4.176 and $3.324, with a 50% retracement level at $3.750 serving as a potential upside target. Resistance levels include the swing top at $4.176 and moving averages at $4.102 and $4.315.
Market Outlook
Traders are closely monitoring the upcoming EIA report to see if the storage surplus transitions to a deficit, which could support prices and encourage further short-covering. A sustained rally would likely require a persistent polar dome or polar vortex to push prices towards the higher resistance levels.