Nat-Gas Prices Hammered by Warmer US Weather Forecasts

January Nymex natural gas tumbled 6.88% to a one‑week low after forecasts shifted warmer for Dec. 14–23, cutting expected heating demand and triggering heavy liquidation. The selloff was compounded by rising U.S. supply — the EIA raised its 2025 production forecast to 107.74 bcf/d and BNEF shows lower‑48 dry gas production at 111.9 bcf/d (+7.2% y/y) with rig counts near multi‑year highs — and a bearish EIA weekly storage print that saw a -12 bcf draw, smaller than consensus and leaving inventories +5.1% above the five‑year average. While strong electricity output and steady LNG flows provide some support, the balance looks tilted toward further near‑term downside unless colder weather or faster export growth tightens the market.

Analysis

January Nymex natural gas closed down sharply by 0.338 points, a 6.88% decline to a one‑week low after forecaster Atmospheric G2 shifted US temperature expectations warmer for Dec. 14–18 and Dec. 19–23, prompting heavy liquidation of front‑month futures. The move follows a near three‑year rally last Friday driven by a late‑autumn cold spell, showing the market remains highly weather‑sensitive.

Supply data and weekly fundamentals are biased toward weakness: the EIA nudged its 2025 US production forecast to 107.74 bcf/day (from 107.70), BNEF reports lower‑48 dry gas production at 111.9 bcf/day (+7.2% y/y), and active rigs are near a two‑year high at ~129. The latest EIA weekly report showed a -12 bcf draw for the week ended Nov. 28, below consensus (-18 bcf) and the five‑year average (-43 bcf), leaving US inventories +5.1% above the five‑year seasonal average and European storage at 72% vs a 5‑yr avg of 82%.

Demand signals are mixed: lower‑48 gas demand and US electricity output are up year‑over‑year and LNG net flows remain sizeable (18.1 bcf/day), providing some support, but current balance tilts bearish absent an abrupt cold snap or faster export growth. The primary near‑term risk is weather model volatility; a sustained return to colder conditions would quickly reverse positioning and tighten balances.

Key Decisions for Investors

• Trim or hedge short‑dated long exposure to front‑month natural gas futures given the 6.9% selloff and bearish production/inventory signals, consider buying puts or collars to protect positions
• Monitor Atmospheric G2 and other short‑range weather models for Dec. 14–23 and next weekly EIA storage prints closely; materially colder runs or larger than expected draws should prompt re‑entry or position increases
• Watch EIA production updates, BNEF production trends, rig counts and LNG flow data as supply/export acceleration increases downside risk; consider short or calendar spread positions if production and export trends remain supportive of contango
• Avoid initiating new outright long positions into winter without clear evidence of tightening (sustained colder forecasts or inventory draws); prefer tactical, time‑limited option strategies or calendar spreads to manage weather and inventory uncertainty