By daniel_grigsby | Feb 01, 2026
The February natural gas futures contract spiked to over $7/MMBtu ahead of its late-January expiry, roughly a 130% increase over valuations in the first half of the month. This was largely due to the onset of Winter Storm Fern, which brought anomalous cold weather to the eastern two-thirds of the United States in late January.
Temperatures fell to 30 degrees below normal across the Midwest and Northeast, creating a surge in heating demand in key natural gas consumption regions. Cold weather, and limited solar and wind capacity, across the south-central and southeast brought high electricity demand met by natural gas.
Additionally, production fell in the Permian and Haynesville Basins due to freezing temperatures, along with snow and ice accumulation. Production in the Appalachian Basin was minimally affected. On average, production fell by about 25 Bcf/day across all regions according to Rystad Energy. This, combined with high demand, resulted in 242 Bcf being withdrawn from storage according to the EIA Natural Gas Storage Report.
Long positioning on this event began on January 16th when prices increased from about 3.10/MMBtu to 3.50/MMBtu, about 6-7 days out from when the cold air outbreak was indicated by the GFS and ECMWF. Buying behavior increased dramatically late in the day on January 20th as forecast confidence grew. The price moved from about 3.90/MMBtu on the 20th to 4.90/MMBtu on the 21st. High volatility during the event, and indication of a similar cold spell towards the end of Jan and early Feb, led futures to expire at $7 on Jan. 28th.
The second cold spell, which is occurring now, turned out to be less severe than models predicted a week ago. The GFS, and the ECMWF to a lesser extent, are suggesting an analog winter storm to Fern in mid February. March contracts have reacted to this news, moving from 3.85/MMBtu to 4.40/MMBtu on Jan. 30th.
With this proposed cold event still two weeks out, the overall likelihood of verification is still relatively low. The market may be overreacting due to the impacts of Fern still fresh on traders’ minds. Long speculation began roughly a week before the onset of Fern. The market is currently reacting to a less severe event which is 15 days away. Prices are also already elevated in the wake of the previous cold spell and would otherwise be mean-reverting to slightly above early Jan levels due to decreased storage and increased LNG demand.
Historically, anomalous cold air events signaled over 2 weeks away tend to either weaken or disappear entirely. The GFS is already showing a repeated loss of HDD over the last 4 runs on Saturday.