Nat-Gas Prices Hammered by Forecasts for Above-Average US Temps

January Nymex natural gas plunged 2.79% to a six-week low as forecasts for warmer-than-normal U.S. temperatures through late December spurred liquidation by reducing near-term heating demand. The move is reinforced by rising U.S. supply — the EIA nudged 2025 production to 107.74 bcf/day and BNEF reports dry gas output near 112.5 bcf/day (+7.1% y/y) with active rigs close to multi-year highs — while LNG flows tick lower; offsetting support came from a larger-than-expected weekly EIA draw of 177 bcf and higher power-sector output, though inventories remain slightly above the five-year average and European storage sits below seasonal norms.

Analysis

January Nymex natural gas fell 11.8 cents (-2.79%) to a six‑week low as forecasts for warmer‑than‑normal U.S. temperatures from December 17–21 and December 22–26 triggered liquidation of long positions after a prior near‑3‑year nearest‑futures rally driven by an earlier cold snap. The warm outlook is explicitly cited by Atmospheric G2 and is the immediate technical catalyst for the sell‑off.

Supply fundamentals are increasingly bearish: the EIA nudged 2025 U.S. production to 107.74 bcf/day (from 107.70 bcf/day), BNEF reports lower‑48 dry gas at 112.5 bcf/day (+7.1% y/y) and active gas rigs remain near multi‑year highs (127 rigs, down 2 from last week but up from a 4.5‑year low). LNG net flows to terminals declined modestly to 18.1 bcf/day (-3.0% w/w), while demand metrics show lower‑48 gas demand at 110.6 bcf/day (-3.4% y/y).

Inventory and power data provide mixed signals: the weekly EIA draw of 177 bcf exceeded consensus and the five‑year average, but total U.S. stocks remain unchanged y/y and +2.8% above the five‑year seasonal average as of Dec 5; European storage is 71% full versus a 5‑year 81% norm. Implication: near‑term price pressure from warm weather and strong production, with risk of sharp reversals if weather models shift or consecutive larger EIA draws recur.

Key Decisions for Investors

• Trim or avoid adding to near‑term long nat‑gas exposure given warm U.S. forecasts and rising domestic production which are driving liquidation
• Use short‑dated hedges (puts or collars) or size reductions to protect existing long positions while awaiting clearer signals from weekly EIA draws and weather model revisions
• Monitor three data triggers closely—weekly EIA storage reports, updated Dec 17–26 weather guidance, and LNG flows/European storage—and consider re‑establishing long positions only if multiple draws exceed expectations or weather turns colder
• Favor tactical, short‑horizon trades that exploit volatility rather than adding unhedged directional exposure until a sustained inventory tightening or export acceleration is evident