US natural gas prices just got a 25% “winter storm” premium in the latest EIA outlook
What a difference a month makes.
In the January 2026 Short-Term Energy Outlook, the US Energy Information Administration (EIA) forecast 2026 natural gas prices at Henry Hub to average $3.46 per million BTU.
One month later? The forecast shot up to $4.31, a 25% jump.
Why such a huge move?
Winter Storm Fern led to record natural gas withdrawals. The EIA authors explain the impact:
As a result, we raised our Henry Hub spot price forecast in February and March by an average of almost 40% from the January STEO. We expect the price increases will moderate as drilling activity drives increases in natural gas production later in the forecast period.
This is a classic case of the supply-demand timing gap, a phenomenon that occurs across the natural resource extraction sector.
But with natural gas, several factors are working to amplify the effect.
First, what’s the supply-demand timing gap?
The timing gap is simple in concept: supply and demand for commodities rarely move in lockstep.
We can have supply shocks and demand shocks. And these shocks can push in either direction.
Possibly the best known shock of any kind was the negative supply shock resulting from the 1973 OPEC oil embargo.
In 2014, we had a positive supply shock with oil, when US unconventionals came roaring online, overwhelming global demand.
On the demand side, the canonical negative shock was COVID-19, which in a few short months suppressed energy demand to a previously unfathomable degree.
For a positive demand shock, we can look to China’s industrialization and urbanization, which went into overdrive in the early 2000’s.
Winter Storm Fern simultaneously drove a larger natural gas demand shock and a smaller supply shock, both of short duration.
On the demand side, the storm pushed record low temperatures across the country, spiking natural gas demand for building heating.
On the supply side, natural gas production sites experienced “freeze-offs” that took billions of cubic feet of daily production offline.
A simultaneous positive demand shock and negative supply shock is a recipe for a price spike, which is exactly what we got.
Now the more important question: why did this particular storm change the forecast so dramatically?
Because it landed at a uniquely sensitive moment.
We’re in the midst of a secular rise in natural gas demand.
The US continues to electrify. Grid interconnection queues are notoriously overloaded. Developers of some fraction of new facilities are looking to bring their own power “behind the meter”, which often means the use of modular natural gas turbines and engines.
And it’s during this gold rush-like pursuit of natural gas power generation assets that Winter Storm Fern drove supply offline.
This is where the two timelines matter.
The demand is materializing quickly.
The supply is slower to follow, given the capital discipline practiced by upstream oil & gas producers.
The EIA expects natural gas producers to respond to these new storm-driven price signals:
…we expect the current high prices will encourage more natural gas directed drilling and lead to higher natural gas production than we previously forecast.
While it was a single winter storm, and large storms often come with price disruptions, this one was indeed different.
The storm was so large, and landed at such a sensitive time, that the country’s whole trajectory around natural gas has changed.
