The U.S. Energy Information Administration (EIA) has revised its near-term view on natural gas prices upward, citing a sharp price surge in January and an unprecedented draw from storage during Winter Storm Fern.
In its February Short-Term Energy Outlook (STEO), the agency reported that natural gas prices averaged $7.72 per million British thermal units (MMBtu) in January as cold temperatures lifted heating demand and curtailed output. The weather-driven supply squeeze produced the largest weekly net withdrawal ever recorded in the EIA’s Weekly Natural Gas Storage Report for the week ending January 30.
As a result of those developments, the STEO now anticipates that U.S. natural gas inventories will finish the withdrawal season in late March at less than 1.9 trillion cubic feet - a level about 8% lower than the agency had forecast previously.
“Winter Storm Fern caused significant short-term pressure on natural gas markets, but we expect higher prices in the near term will increase drilling, resulting in higher production later this year and helping to replenish storage,” said EIA Administrator Tristan Abbey.
Despite nudging the near-term outlook higher, the EIA trimmed its longer-term price expectations. The agency now projects Henry Hub averages of $4.30/MMBtu in 2026 and $4.40/MMBtu in 2027, each figure roughly 5% below the forecast issued in January.
The STEO also documented a weather-related production dip: U.S. natural gas output fell 3% from December to January due to severe winter weather. The EIA expects most of that lost production to return in early February. Looking further ahead, production is forecast to rise in the second half of 2026 as new pipeline capacity in the Permian Basin becomes available and producers respond to higher near-term prices with increased drilling activity.
The outlook update extended beyond natural gas. Brent crude averaged $67 per barrel in January, the EIA said, marking the highest monthly level since September 2025. The agency attributed that rise to weather disruptions and tensions with Iran. Nevertheless, Brent is expected to average $58 per barrel in 2026 and $53 per barrel in 2027 as global production outpaces demand.
Coal consumption forecasts were also adjusted upward. The EIA raised its projection for U.S. coal use after coal-fired power plants ramped generation during the recent cold spell. The agency estimated January coal consumption at 43 million short tons, a level 10% higher than previously estimated, supported by a 7% increase in U.S. electricity consumption from December to January.
The EIA’s February STEO paints a picture of immediate market stress from severe winter weather, followed by an expectation that higher prices will prompt a production response later in the year that should relieve some of the near-term pressure on storage and prices.