Nat-Gas Prices Under Pressure as US Weather Forecasts Warm

January Nymex natural gas fell 2.46% to a seven‑week low as US weather forecasts turned warmer for Dec. 25–29, prompting heavy futures liquidation. The move is reinforced by rising supply—EIA raised its 2025 US production forecast to 107.74 bcf/d, BNEF reports lower‑48 dry gas at 113.1 bcf/d (+8.8% y/y) and rigs near multi‑year highs—while LNG flows eased modestly; offsetting support includes a larger‑than‑expected EIA weekly draw of 177 bcf and modestly stronger US power output. Net implication: near‑term downward pressure from milder weather and ample production, but larger draws and demand trends leave upside risk during the upcoming withdrawal season.

Analysis

January Nymex natural gas futures closed down 0.101 (-2.46%) to a seven‑week low, driven by a shift to warmer U.S. weather forecasts for Dec. 25–29 (Atmospheric G2) that prompted heavy futures liquidation. The immediate technical move reflects reduced near‑term heating demand expectations despite seasonally elevated trading sensitivity ahead of the withdrawal season.

Supply metrics remain bearish: the EIA nudged its 2025 U.S. production forecast to 107.74 bcf/d (from 107.70), BNEF reports lower‑48 dry production at 113.1 bcf/d (+8.8% y/y), and active gas rigs sit at 127 after a recent two‑year high, while LNG net flows eased to 16.8 bcf/d (-5.4% w/w). Demand datapoints are mixed — lower‑48 gas demand was 125.5 bcf/d (+39.0% y/y) and U.S. electricity output rose 2.3% y/y, but inventories were only modestly supportive with a larger‑than‑expected weekly draw of 177 bcf versus a -170 bcf consensus and stocks +2.8% above the five‑year average as of Dec. 5.

Implication: near‑term downward pressure is credible given warmer forecasts and ample production, but the larger weekly draw and rising power demand preserve upside risk into the 2025/26 withdrawal season. Key risks that could reverse the selloff are colder weather, sustained larger draws, tighter European storage (70% vs 5‑yr 79%) or a rebound in LNG export flows, so monitoring weekly EIA data, weather model shifts, rig counts and LNG flows is critical.

Key Decisions for Investors

• Trim near‑term long exposure or hedge with short futures/put protection given warmer weather forecasts and elevated U.S. production
• Monitor the next EIA weekly storage report and weather model updates closely and consider adding exposure only if draws materially exceed consensus or forecasts turn colder
• Watch LNG net flows, U.S. production trajectory and rig counts for signs of tightening supply; maintain defensive sizing if exports remain weak and production stays high
• Prefer option structures or staggered entry to preserve upside optionality into the withdrawal season while limiting downside from short‑term weather and liquidation risk