February 2025 Storage Surprise
Looking back to the week of February 27, 2025, we saw a natural gas storage draw of 132 billion cubic feet (Bcf), which was significantly more than the 122 Bcf the market was expecting. That surprise withdrawal signaled a tighter supply balance than many had priced in at the time. This event serves as a critical reference point for our current market position. The situation now is far more tense than it was a year ago. As of the latest report for the week ending February 28, 2026, working gas in storage is just 1,550 Bcf, which is over 30% below the five-year average for this time of year. This deficit has been driven by consistently strong demand, particularly as U.S. LNG export capacity has expanded by nearly 2 Bcf/day since early 2025, pulling more supply out of the domestic market. Current weather forecasts for the next two weeks show a persistent cold front moving across the Midwest and Northeast, which will increase late-season heating demand. Unlike last year, we do not have a significant storage buffer to absorb this demand spike. This makes the market highly susceptible to price volatility on any further bullish news.Positioning And Risk Management
Given these conditions, we see a strong case for upward price movement in the near term. The low inventory levels heading into the spring injection season mean there will be intense competition for gas, supporting prices through the coming months. Therefore, we should consider establishing or adding to long positions in the April and May 2026 futures contracts. Dry gas production has been hovering around 104 Bcf/day, and while that is robust, it is struggling to keep pace with the combined winter demand and record export levels. Buying call options could be a prudent strategy to manage risk while maintaining exposure to potential price spikes. The market is extremely sensitive to any further supply disruptions or demand surprises. Create your live VT Markets account and start trading now.
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