Natural gas inventories are shrinking faster than usual, pushing prices higher as winter demand bites. A forecast 158 billion cubic feet (BCF) withdrawal for the week ending December 19 has left storage levels 125 BCF below last year and 70 BCF under the five-year average, signaling a potentially tight supply situation.
Volatility Rises as Contract Expires
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The expiring February 2026 contract is experiencing heightened price swings, while longer-term forecasts remain relatively stable.
The final days of trading for the February 2026 contract are proving turbulent, a common pattern historically. Current prices have surged past the upper limit of the historical interquartile range 10 days before expiration, even approaching record highs. This suggests strong buying interest, or a shift in market expectations, but also raises the risk of a price correction back toward historical norms.
Forward Curve Shows Near-Term Divergence
The shape of the 2025 forward curve for near-term contracts largely mirrors the ranges seen in 2023 and 2024. However, the expiring February 2026 contract is displaying significant volatility.
Storage Levels Continue to Decline
The Energy Information Administration (EIA) report for the week ending December 19 forecasts another substantial withdrawal from storage. Gas stocks are expected to decrease by 158 BCF, which is 35 BCF lower than the five-year average. Current storage levels stand at 3,420 BCF, 125 BCF below last year’s level and 70 BCF below the five-year average.
Heating and Cooling Demand Surges, Then Eases
Heating and cooling degree days (HDD+CDD) across the United States recently reached 30-year highs before easing slightly. Despite this surge, meteorological models predict weather conditions over the next two weeks will be average and moderately warm, aligning with the 30-year climate norm.
Supply and Demand Balance Shifts
As of December 24, the daily difference between supply and demand is decreasing after a period of unusual growth, falling below the lower interquartile range for 2014-2024.
Reserves Sufficient for About a Month
Current consumption levels indicate that reserves are sufficient for approximately 30 days of supply. This is one day higher than in 2024, but two days lower than the average.
European Storage Levels Fall
Overall gas storage in Europe stood at 66.1% on December 24, a 2.7% decrease for the week. This is 9.8% below the average level and 9.2% lower than last year. The lowest storage levels are currently in Croatia (41.7%), Latvia (50%), Denmark (52.9%), and the Netherlands (53.5%). Higher levels are found in Sweden (102%), Portugal (93.5%), Poland (85.7%), Romania (78.8%), and Italy (76.5%).
Gas Generation Declines in US48
Gas generation in the US48 energy balance fell by 3% on December 24, 2025, accounting for 35.9% of the total. Nuclear generation increased by 2.8% to 20.8%, while coal generation decreased by 2.5% to 16.8%, nearing a five-year low. Wind generation fluctuated, settling at 13.9% after reaching 17.5%, and solar generation accounts for 3.5% of the total.
What’s driving the current natural gas price volatility? Declining storage levels combined with expiring contracts and fluctuating demand are creating uncertainty in the market.
