Natural Gas Update January 27,2026

Overview

Natural Gas--March NG is down 11.6 cents at 3.782
NG futures are easing back after Monday's strong rally. Reasons cited for today's pullback are profit taking and the prospect that the current outage in production will ease by next weekend, as per Rsytad Energy commentary. Market News commentary adds that early February weather forecasts have dialed back some of the cold. 

Natural gas supply outages have emerged across the U.S. in the wake of winter storm Fern, with an initial loss of 2 BCF/day from the Bakken, Rockies and Mid-Continent, followed by a more abrupt drop of 12 BCF/day, primarily driven by the Permian and broader Gulf Coast region," a Rystad Energy analyst in a note. "We expect significant outages to persist throughout the first half of the week followed by a swift recovery Sunday." (Seeking Alpha) Lower 48 states dry gas production is estimated 1.37 BCF/d higher today at 96.49 BCF/d, but is still well below the average of 113.3 BCF/d in the first half of January, BNEF data shows.  Average gas output in the Lower 48 U.S. states dropped to 106.9 BCF/d so far in January, down from a monthly record high of 109.7 BCF/d in December, according to LSEG, as producers shut in production.

Regulatory filings with Texas authorities showed 2 dozen reports of upsets at natural gas processing plants and compressor stations in Texas. But this was much lower than the more than 200 reported upsets during the first five days of a severe winter storm in 2021, TAC energy analysts said in a note on Monday. (Reuters)
Market News data shows LNG terminal feedgas demand is rebounding today by 2.18 BCF/d to 12.58 BCF/d. Flows averaged around 18.5 BCF/d last week prior to the cold, Market News adds.

Average U.S. lower 48 states temperatures are forecast well below normal until the end of the month with a gradual warming in early Feb although remaining below normal. The NOAA 8-14 day chart shows an easing of the cold in the east but still with temperatures expected below normal. 

US dry gas consumption is estimated 6.16 BCF/d lower today at 134.98 BCF/d after rising to a record high the prior day, Bloomberg shows. The seasonal five-year average is around 101 BCF/d.

February NG futures settled up 28.9% Monday after rising 70% last week. The March NG futures settled up 8.00% Monday, while April was up 4.46%. Monday's high in the spot February contracts was $7.439. The contract settled at $6.800.

Today is the last trading day for the February NG / LN options.

In the options on the CME on Monday, the March call open interest rose by 25,279 contracts with notable increases in the $5.00 and $6.00 call strikes. One trade seen had the March $6.00 call sold against buying of the $4.00 call at a cost of 27.5 cents with 0.3 delta March futures sales at $3.89.  A notable trade seen in the CSO's was 6,000 contracts of the October January CSO minus 75 cent call were sold against buying of the minus $1.50 put at a cost of 5.2 and 5.3 cents. Earlier in the day when the underlying futures spread was about 6 cents narrower, 1,000 contracts of the minus 75 cent call versus the minus $1.50 put traded 1.5 cents. The delta of the option (0.5 delta) was high versus the underlying futures spread--hence the option price moving quite a bit with the weakness in the spread. The minus 75 cent call portion of the October January CSO trade was an opening trade, as per CME open interest data. In a further opening trade in the October January CSO, 4,500 contracts of the minus $2.00 puts went between 2.5 and 2.8 cents cost.

Technically, March NG futures are having an inside day with a double bottom currently at 3.651/3.658 from yesterday/today. Below that support lies at 3.581-3.585 and then at 3.510-3.515. Resistance is seen at 3.89 and then at the 3.985 area. Momentum basis the March daily chart is getting near overbought.

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