**US Natural Gas Market Faces Mounting Supply Pressures as Storage Surges**

Nymex natural gas prices faced headwinds on Friday, with February contracts slipping 0.80% to close lower despite sitting above Thursday's 3-month lows. The culprit? Abundant domestic supplies that are showing no signs of easing. Thursday's EIA report revealed the real story—nat-gas storage levels are now tracking 3.4% above their 5-year seasonal average, a significant bearish signal for the broader market.

**Export Terminal Disruptions Amplify Supply Glut**

Even more telling is the situation at key LNG export facilities. Feedgas volumes into Cheniere's Corpus Christi terminal and the Freeport LNG export facilities along the Texas Gulf Coast have been running below normal this week due to electrical and piping malfunctions. This operational slowdown, while temporary, is paradoxically weighing on prices by allowing US nat-gas storage to continue building—exactly the opposite of what bulls want to see.

**Weather Support Offers Limited Relief**

Friday's price action saw modest stabilization thanks to forecasts pointing toward below-normal temperatures across northern US regions and the East through January 30. The Commodity Weather Group's outlook suggested potential near-term support from increased heating demand, but the gains proved insufficient to overcome structural headwinds from record storage levels.

**Production Outlook Adds Complexity**

Production dynamics present a mixed picture. The EIA downwardly revised its 2026 dry nat-gas production forecast to 107.4 bcf/day—down from the prior month's 109.11 bcf/day estimate—signaling future tightness. However, current output remains robust near record highs. Lower-48 dry gas production on Friday reached 113.0 bcf/day (+8.7% year-over-year), while demand contracted to 104.9 bcf/day (-2.4% year-over-year), according to BNEF data. LNG export flows came in at 19.8 bcf/day, up 2.5% week-over-week.

**Storage Inventory Tells the Real Story**

The weekly EIA report delivered disappointing news for bulls: nat-gas inventories fell just 71 bcf for the week ended January 9, substantially below consensus expectations of 91 bcf and dramatically underperforming the 5-year average weekly draw of 146 bcf. As of January 9, storage stood 2.2% higher than year-ago levels and 3.4% above seasonal norms—a clear sign of ample supply cushion. European storage, by contrast, sat at only 52% capacity versus the 5-year average of 68% for this period, highlighting regional supply-demand divergence.

**Rig Count Signals Caution Ahead**

Drilling activity showed signs of moderation. Baker Hughes reported the active US nat-gas rig count fell 2 units to 122 in the week ending January 16, retreating further from the 2.25-year high of 130 established in November. While the 4.5-year low of 94 rigs posted in September 2024 now feels distant, current activity suggests producers are becoming more selective—a potential warning signal if commodity prices remain under pressure.

The convergence of elevated storage, export facility constraints, and softening electricity demand creates a challenging environment for natural gas bulls, with near-term price relief dependent on either demand recovery or supply-side adjustments.