U.S. Natural Gas Prices Slide 5% on Warm Weather, Weak Demand Outlook
U.S. natural gas futures extended losses as warmer-than-normal weather forecasts weighed on near-term demand, even as LNG feedgas flows and production levels remained elevated.
(Reuters) — U.S. natural gas futures dropped more than 5% on Jan. 5, marking a fourth consecutive session of losses pressured by forecasts for warmer weather nationwide and lower demand projections in the coming weeks.
Front-month gas futures for February delivery on the New York Mercantile Exchange traded 20.8 cents lower, or 5.7%, at $3.41 per million British thermal units as of 08:51 AM ET.
"This market is dropping into fresh new low territory this morning because weekend updates to the short-term temperature views failed to offer a significant change within the short-term forecasts," consultancy Ritterbusch & Associates said in a note.
Meteorologists predict warmer-than-average temperatures across the nation through Jan. 20, with Heating Degree Days expected to decline from 369 on Friday to 367 on Monday, remaining way below the 30-year normal level of 458. HDDs are a metric for gauging energy demand for heating buildings.
"Consequently, downside price risk in nearby futures now extends to the $3.00 area, achievement of such could be attained this week unless some weather support is forthcoming," Ritterbusch & Associates added.
Financial firm LSEG forecasted average gas demand, including exports, in the U.S. Lower 48 states would rise marginally from 133 billion cubic feet per day this week to 134.2 billion cubic feet per day next week. The projection for this week is lower than Friday's estimate, while next week's outlook is slightly higher.
LSEG said average natural gas output in the lower 48 U.S. states climbed to 109.2 billion cubic feet per day in January, still below December's monthly record of 109.9 billion cubic feet per day.
Average gas flows to the eight large U.S. LNG export facilities climbed to 18.8 billion cubic feet per day so far in January, exceeding December's record of 18.4 billion cubic feet per day.
"We still believe our positive thesis will remain intact for 2026 largely on the back of rising feedgas demand for LNG, albeit in the later innings of our call as we do see some potential headwinds in the supply-demand picture for 2027," JP Morgan said in a note.
Elsewhere, wholesale gas prices in Europe and Britain fell on Monday morning after hitting a one-month high in the previous session, with traders taking some profit and as forecasts of less cold and windy weather eased gas demand.
Meanwhile, Norwegian energy group Equinor said on Jan. 2 it had filed a civil suit in the U.S. District Court for the District of Columbia challenging a U.S. Department of the Interior order to suspend its Empire Wind project.