Natural gas prices plunged 15% Sunday evening as warmer February forecasts dampened short-term demand, but several factors suggest a potential rebound reminiscent of the dramatic rally sparked by the war in Ukraine in 2022.
A Potential Rebound on the Horizon
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Despite recent declines, bullish signals point to a possible surge in natural gas prices.
- Global energy demand is increasing, driven by geopolitical instability and a growing need for reliable energy sources.
- New U.S. Liquefied Natural Gas (LNG) export terminals will expand access to international markets.
- Declining coal production is creating a void that natural gas is poised to fill.
Natural gas has struggled over the last five years, falling nearly 60% and living up to its nickname, the “widow maker.” However, the energy landscape is shifting, and several tailwinds could propel prices higher.
The Insatiable Appetite of AI Data Centers
The construction of artificial intelligence data centers is the largest infrastructure project in history. The data centre construction market reached over $250 billion in 2025, according to data from grand View research, as companies like Alphabet and Microsoft compete for dominance in the AI space. That figure is projected to balloon to $450 billion by the end of the decade.
Nvidia CEO Jensen Huang recently emphasized this growth at the World Economic Forum (WEF) 2026 in Davos, Switzerland, dismissing bubble fears and highlighting the difficulty of securing older GPUs due to high demand. Huang predicts trillions of dollars will be invested in supporting the latest AI models.
This massive buildout faces a significant hurdle: energy. Electricity prices are rising as AI data center electricity demand is expected to double by the end of the decade.
While renewable and nuclear energy are gaining traction, their higher start-up costs make natural gas the most practical, affordable, and readily available source of high-volume electricity for now.
U.S. LNG Producers Eye International Markets
The debut of several large Liquefied Natural Gas (LNG) export terminals in 2026 will allow U.S. producers to capitalize on international demand, particularly in Europe. With domestic gas prices lower than in Europe, increased exports are likely, tightening domestic supply and supporting prices.
Moreover, previous administrations have prioritized “American Energy Dominance,” securing long-term LNG commitments from countries like Japan and Qatar, ensuring sustained demand.
Natural Gas Steps In as Coal Production Declines
U.S. coal production fell 11.3% year-over-year, with the number of coal-producing mines decreasing from 560 to 524, according to the U.S. Energy Data Administration (EIA). While the shift to renewable energy sources is underway,they are not yet sufficient to replace coal. Natural gas offers a practical, affordable, and cleaner alternative, emitting roughly half the CO2 of coal.
Technical Outlook
The US Natural Gas Fund ETF (UNG) has recently traded between $10 and $16.90.Following warmer weather forecasts, UNG is likely to test its 200-day moving average. A hold above this level woudl signal continued bullish momentum.
What factors could drive a significant increase in natural gas prices? The combination of surging demand from AI data centers and expanding U.S. exports creates a compelling case for a long-term bullish outlook, despite the commodity’s inherent volatility.
