Should Investors Buy Natural Gas After a 60% Price Collapse?

Natural gas prices have fallen sharply from their early-year levels, leaving investors wondering whether this is a buying opportunity or a warning sign. After climbing to three-year highs in January, futures have dropped to nearly half that level.

At this time, investors may want to keep an eye on natural gas-focused names such as The Williams Companies WMB, Comstock Resources CRK and Expand Energy EXE, which offer varying degrees of exposure to gas volumes and pricing trends.

The Magnitude of Correction

Natural gas has undergone a steep correction, sliding from January highs of above $7 per MMBtu to the $3 to $3.10 range. That represents a roughly 60% pullback in just a few weeks, erasing much of the winter-driven premium that had built into the market.

Futures have now logged two consecutive lower weeks, reflecting easing weather concerns and softer near-term demand. Analysts have flagged the risk of prices slipping below $3 if fresh cold-air threats fail to emerge. This weakness has dampened sentiment, even as some underlying fundamentals remain constructive.

Supply Tightness Beneath the Surface

Even though prices have fallen sharply, storage data does not show an oversupplied market. Over the past three weeks, total withdrawals have reached record levels, including a historic 360 billion cubic feet (Bcf) draw for the week ending Jan. 30 — the largest weekly pull on record.

Inventories currently stand about 6% below the five-year average and 4% below last year’s level. In addition, gas is being taken out from storage about 21% faster than normal for this time of year. These figures point to tighter balances than headline prices imply, offering a counterweight to the bearish narrative.

Demand and Export Mix

On the demand side, warmer temperatures have taken a toll. Consumption declined by about 19.1 Bcf per day as heating needs faded. Looking ahead, forecasters assign around 60% probability to the onset of El Nino in September, raising expectations for a potentially mild winter next season. Such weather patterns can cap upside momentum and limit speculative buying.

At the same time, liquefied natural gas (“LNG”) activity remains a key swing factor. LNG vessel movements and expanding export capacity suggest that firmer overseas shipments could lift consumption back above 20 Bcf per day. Stronger export flows would help tighten balances and partially offset domestic weather-related weakness.

Forecasts, Production and Risk-Reward

The U.S. Energy Information Administration projects a 2026 average price of $4.31 per MMBtu, signaling expectations for firmer pricing over time. However, production is also poised to climb toward 110 Bcf per day as new Permian Basin pipelines come online. Rising output could temper sustained rallies, even if demand rebounds.

While natural gas has extended the pullback from winter highs, the magnitude of the earlier drawdowns and subpar storage levels limited deeper losses. This underscores the tug-of-war between near-term weather softness and structural tightness.

What Should Investors Do

For investors, the setup presents a balanced but potentially improving risk-reward profile. The bull case rests on below-average storage, European replenishment needs and the possibility of forecast errors that revive demand. The bear case hinges on warmer weather, mild winter expectations and rising production.

At this time, maintaining exposure to names such as The Williams Companies, Comstock Resources and Expand Energy may offer a measured way to participate in any recovery while monitoring fundamental shifts closely.

3 Natural Gas Stocks to Focus On

The Williams Companies: U.S. natural gas demand is projected to grow significantly in the long term, and The Williams Companies seems to be well-positioned to capitalize on the same, owing to its impressive portfolio of large-scale value-creating projects. With its extensive network handling a third of the U.S. natural gas and significant expansion projects in the pipeline, Zacks Rank #3 (Hold), Williams is set to benefit from favorable industry dynamics and growth prospects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 10.5% year-over-year growth. Williams Companies’ expected EPS growth rate for three to five years is currently 24.1%, which compares favorably with the industry's growth rate of 10.5%. 

Comstock Resources: It is an independent natural gas producer based in Frisco, TX, with operations concentrated in north Louisiana and East Texas. Comstock Resources — currently carrying a Zacks Rank of 3 — is fully focused on developing the Haynesville and Bossier shales, two of the largest gas plays in the United States. 

CRK holds a large acreage position across the Haynesville, giving it direct exposure to Gulf Coast LNG demand growth. Its production is 100% natural gas, making it one of the most gas-levered E&Ps in the sector. The Zacks Consensus Estimate for Comstock Resources’ 2026 earnings per share indicates a 27.8% year-over-year surge. The firm has a trailing four-quarter earnings surprise of roughly 56.9%, on average.

Expand Energy: Expand Energy has emerged as the largest natural gas producer in the United States after completing the Chesapeake–Southwestern merger. With a strong footprint in the Haynesville and Marcellus basins, the Zacks #3 Ranked company is well positioned to benefit from rising natural gas demand fueled by LNG exports, growing AI and data-center power needs, EV adoption and broader electrification trends.

The Zacks Consensus Estimate for Expand Energy’s 2026 earnings per share indicates a 38.1% year-over-year improvement. The firm has a trailing four-quarter earnings surprise of roughly 4.9%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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