Natural gas prices have plummeted roughly 29% this February as Morgan Stanley analysts link the decline to significantly milder late-winter weather and a rapid rebound in supply following Winter Storm Fern. The bank attributes the sharp drop in prices to a reversal in heating demand, noting prompt Henry Hub futures fell to approximately $3.10 per million British thermal units (mmbtu) from higher levels. This supply surge stems from a notable increase in drilling activity, with the Haynesville shale basin seeing its rig count rise to 52, now roughly 10% above Morgan Stanley's estimate of what the market requires this year.

This heightened drilling has boosted Lower 48 dry gas production to an estimated 107.9 billion cubic feet per day (bcf/d) for the month, up 1.5 bcf/d from January. While Morgan Stanley maintains the broader summer supply-demand outlook remains constructive, the combination of rebounding supply and the softer February has created a more mixed picture for the market.