Natural Gas Update February 4,2026

Overview

Natural Gas--NG is up 5.6 cents at $3.367
NG futures are higher today following Tuesday's rebound after the extremely sharp fall seen Monday. The rally of the past 24 hours is said to be due to a slightly cooler forecast, position squaring, and some dip buying, as per comments seen.

The Commodity Weather Group said Tuesday that above-normal temperatures are expected across the Midwest and US South through February 17, but colder-than-normal temperatures are expected in the mid-Atlantic and Northeast through February 12.

Position squaring is evidenced by NG futures open interest on the CME falling a lot in Tuesday's activity. Open interest was down 54,203 contracts in total. March open interest fell by over 44,000 contracts, which we take to be mostly short covering. April open interest fell by over 8,000 lots and May by over 3,000 contracts.

The following commentary re the options market for NG was seen yesterday: "The near-term Henry Hub skew to the calls is lower so far this week as the severe cold in late Jan has eased but the market still holds a bias to cover upside prices risks. The Henry Hub second month 25 delta call-put volatility spread is back around 11% today compared to around 15% late last week and a high of 56.5% on Jan. 26 amid the peak of the cold weather disruption." (Bloomberg)

Notable were the open interest increases in some October January Calendar Spread Option (CSO) strikes. The minus 75 cent call open interest rose by 4,500 lots-with size having traded at 5.4 and 5.1 cents. The October January minus 75 cent call was also sold versus buying of the minus $1.00 call at prices of 9.5 and 9.7 cents. A new position was initiated in the minus 85 cent call in the October January CSO. 3,000 contracts of the minus 85 cent call and minus $1.75 put were sold versus buying of the minus $1.25 put at a cost of 2 cents. The October January minus $2.00 put open interest rose by 6,150 contracts. One trade seen had the minus $2.00 put option trading 4.6 cents. 11,000 contracts traded of selling of the minus 75 cent call and the -$2.00 put versus buying of the -$1.50 put at a cost of 2.3 cents. A further 3,000 contracts of the minus 75 cent/minus $2.00 put/minus $1.50 put trade was seen done at a cost of 1.3 cents. The October January futures spread settled Tuesday at -$1.115.  In the March April CSO, the 50 cent/$1.00 call spread traded 3,000 contracts worth at 2.9 cents. Open interest shows decreases in those strikes. 3,000 contracts of the March April 25 cent calls traded 7.0 cents. The March April futures spread settled Tuesday at 11.8 cents.

Technically NG futures still have negative momentum basis the DC and daily charts. But, for now, the lows of the prior 2 sessions at 3.155/3.169 remain a fair way away from the current price. Has the market carved out interim lows? NG futures are having their second straight inside trading session versus Monday's price range. Resistance comes in above at 3.476-3.479 and then at 3.580-3.585. Support lies at 3.169-3.177 and then at 3.114.

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This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

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