US Natural Gas Falls Over 5% Ahead of Above Normal Temperatures

U.S. natural gas futures fell over 5% on Tuesday, pressured by forecasts of above normal temperatures next week, though the market was set for a second consecutive yearly gain led by record gas flows to liquefied natural gas export plants.  

Front-month gas futures for February delivery on the New York Mercantile Exchange traded 20.3 cents lower, or 5.1%, to $3.77 per million British thermal units. The contract was up over 4% so far this year. 

"The weather factor continues to dominate near-term price direction and with latest updates to the 1–2-week forecasts, some further price pressure would appear likely," consultancy Ritterbusch & Associates said in a note.  

"Although this week's cold temperatures prompted significant support at the beginning of this week, focus has shifted to next week where above normal temperatures are generally expected across most of the U.S." 

Meteorologists forecast above normal temperatures nationwide through January 14, with Heating Degree Days falling from 439 on Tuesday to 413 on Wednesday. HDDs measure energy demand to heat buildings.

Financial firm LSEG projected average gas demand in the lower 48 states, including exports, would edge lower from 137.8 bcfd this week to 134.5 bcfd next week, below its Tuesday's projection.     

The contract was down ahead of a federal storage report later in the day, which is expected to show U.S. energy firms likely pulled a smaller-than-usual 50 billion cubic feet of natural gas from storage last week.

That figure would be less than half the draw of 112 bcf during the same week a year ago and a five-year average draw of 120 bcf for this time of year.    

Earlier this month, the Energy Information Administration projected in its Short-Term Energy Outlook that dry gas production will rise to 109.1 bcfd in 2026. That compares with a record 103.6 bcfd in 2023. Analysts expect natural gas prices to be supported in 2026, owing to increased demand for electrification and gas-fired plants. 

"Our view for 2026 and beyond is kind of two-fold," said Robert DiDona, president of Energy Ventures Analysis. "One is that we see healthy power generation coming from the gas-fired sector to support the electric demand growth, and two is we're about to hit the next wave of the LNG boom."     

LSEG said average natural gas output in the lower 48 U.S. states climbed to 110.1 billion cubic feet per day in December, surpassing November's monthly record of 109.6 bcfd.

Average gas flows to the eight large U.S. LNG export facilities climbed to 18.5 billion cubic feet per day (bcfd) so far in December, exceeding November's record of 18.2 bcfd.

On a daily basis, LNG feedgas was set to reach an over three-week high of 19.1 bcfd on Wednesday driven primarily by increased flows to Plaquemines plants in Louisiana, which is at 4.3 bcfd, above the 7-day average of around 4 bcfd, as per LSEG data.

Elsewhere, Dutch and British wholesale gas prices were little changed as strong wind power output curbed demand from gas plants, but the benchmark front-month Dutch contract was poised to end 2025 around 40% lower than the start of the year. 

 (Reuters)