Winter chill lifts natural gas prices
Natural gas prices are climbing as colder-than-expected winter weather drives heating demand across the United States. The Henry Hub spot price is now forecast to average almost $4.30 per million British thermal units (MMBtu) this winter, more than 40 cents higher than previously expected.
According to the U.S. Energy Information Administration, the upward revision is driven primarily by colder-than-expected weather in December, which has increased space heating demand significantly. The winter average is now 22% higher than last year.
Strong demand outlook for 2026
The EIA expects natural gas prices to remain elevated throughout 2026, forecasting an annual average of approximately $4.00/MMBtu. This represents a 16% increase compared to 2025, driven primarily by increased liquefied natural gas (LNG) exports amid relatively flat domestic production growth.
U.S. dry natural gas production is forecast to average 109 billion cubic feet per day in 2026, up just 1% from this year. Meanwhile, demand continues to grow from multiple sources:
- LNG exports reaching record levels
- Power generation from gas-fired plants
- Industrial consumption remaining strong
- Residential heating demand during winter months
Storage levels provide cushion
Despite the price increases, natural gas storage levels remain healthy. Inventories are forecast to conclude the winter heating season at approximately 2 trillion cubic feet (Tcf), about 9% above the five-year average.
The elevated storage level reflects strong production throughout 2025 and provides some buffer against extreme price spikes during cold snaps. However, any extended periods of severe winter weather could quickly draw down these reserves.
Market momentum building
Natural gas futures recently traded near the $4/MMBtu mark, holding most of the gains from a late December rebound. The market touched a two-month low of $3.76 on December 24 before recovering on forecasts of continued cold weather.
The commodity is on track for a roughly 4% gain in 2025, marking a second consecutive annual rise. Analysts expect the market to remain supported in 2026 by rising demand for electrification and gas-fired power generation.
Looking ahead
The EIA forecasts that prices will moderate somewhat after the winter heating season ends, as milder spring weather reduces heating demand. However, the fourth quarter of 2026 is expected to see prices climb again toward $4.50/MMBtu as the next winter approaches.
Key factors to watch include weather patterns across major population centers, LNG export capacity additions, and any changes to domestic production levels. The ongoing shift toward natural gas for power generation continues to provide structural support for demand.