Natural gas futures prices are experiencing a significant downturn, hitting a six-week low as forecasts predict milder weather across key U.S. heating regions for late December. This shift in the weather outlook is dampening demand expectations and pushing futures contracts lower, despite a larger-than-anticipated draw from natural gas storage inventories recently. The January 2026 NYMEX natural gas contract recently fell to $4.10 per million British thermal units (MMBtu), marking a 3.08% drop in a single day and a 22% decline for the week ending December 12.^[1][2][3] ### Market Reverses Course on Demand Outlook The natural gas market saw considerable volatility in early December. An initial cold snap pushed Henry Hub spot prices briefly above $5.00/MMBtu around December 5. This early-month chill led to increased demand for heating. However, this bullish momentum quickly faded as updated weather models pointed to an "exceptionally warmer" pattern for the period between December 16 and December 25, particularly across the central and eastern United States.^{[4][5][6][7][3][8][9]} Eli Rubin, an energy analyst at EBW Analytics Group, noted that late December heating demand "continues to disintegrate." He observed that the week leading into Christmas "shed another seven gHDDs over the past 24 hours," indicating a significant reduction in anticipated heating needs.^[7] This milder forecast is directly weakening the demand narrative that briefly supported higher prices.^[4][7][3][8] ### Demand Forecasts Trimmed Energy market analysts are now revising their demand forecasts downwards. LSEG, for instance, projected that average gas demand in the Lower 48 states, including exports, would slide from 142.3 billion cubic feet per day (Bcfd) this week to 126.3 Bcfd next week. This revised forecast for the upcoming week is lower than previous outlooks.^[3] Such substantial drops in projected demand put downward pressure on physical gas prices. Rubin warned that daily demand could surge into Sunday's peak but is then expected to plunge by 26 Bcfpd into the middle of next week.^[7] Despite a recent cold period, overall U.S. dry natural gas production remains near record highs. Production averaged 109.4 Bcf/d in December-to-date. The U.S. Energy Information Administration (EIA) also increased its 2025 production forecast to 107.74 Bcf/d, signaling a robust supply outlook.^{[4][6][10][8]} ### Storage Draw Fails to Halt Price Drop The U.S. Energy Information Administration (EIA) reported a net decrease of 177 Bcf from underground natural gas storage for the week ending December 5, 2025.^{[11][12][5][3][13]} This figure exceeded the 166 Bcf withdrawal analysts had forecast in a Reuters poll and was considerably higher than the five-year average withdrawal of 89 Bcf.^[3] Normally, such a large storage draw would signal tighter supply and potentially lead to a price increase. However, the market largely dismissed this bullish storage report. Traders are instead focusing on the prevailing mild weather forecasts and the ample supply conditions. As of December 5, total working gas in storage stood at 3,746 Bcf, which is 103 Bcf above the five-year average of 3,643 Bcf.^[11][3][8] This indicates that despite the recent withdrawal, overall inventories remain comfortable. ### EIA's Mixed Outlook for Winter The EIA’s December Short-Term Energy Outlook (STEO), released on December 9, projects Henry Hub spot prices to average around $4.30/MMBtu for the entire winter season (November 2025 to March 2026). T^{[14][15][16][17]}his revised forecast is more than 40 cents/MMBtu higher than their November estimate, primarily due to the colder-than-expected weather experienced in early December, which increased space heating demand. T^[15][17]he EIA stated it expects residential and commercial sectors to consume 6% more natural gas in December than previously forecast, leading to reduced storage levels. ^[17]However, the EIA also anticipates milder-than-normal weather in early 2026. Coupled with rising production, this is expected to help moderate natural gas prices after the winter. The agency projects the Henry Hub price to average about $4.00/MMBtu for all of 2026. T^[15][4][17]his suggests that while the initial winter months might see elevated prices due to early cold, the overall trend for the heating season and beyond is for price moderation. ### LNG Exports and Market Dynamics Liquefied Natural Gas (LNG) exports continue to be a significant structural growth driver for U.S. natural gas demand, with new export capacity ramping up. L^{[18][14][4][5][9]}NG feedgas flows reached a record 19.2 Bcf per day on November 26, 2025, and averaged 18.8 Bcfd so far in December. ^[5][3]Despite this strong underlying demand, LNG feedgas flows were slightly softer for the week ending December 12, dropping 4% to 18 Bcf/d. T^[8]his minor dip, combined with high production and the bearish weather outlook, contributed to the overall negative sentiment in the market. Analysts suggest that the broader structural backdrop, underpinned by a tightening supply-demand balance through 2026, remains supportive beyond the current pullback. ^[4]### Looking Ahead: Weather Remains Key The immediate future for natural gas prices will largely depend on how weather forecasts evolve. Phil Flynn, a senior analyst for Price Futures Group, commented that "everybody is jumping ship on natural gas" due to forecasts for dramatically warmer weather over the Christmas holiday weekend. H^[3]e added that "if the six-to-10-day weather forecast starts to look a little colder, we could see a big rebound in natural gas prices." ^[3]The current market sentiment is overwhelmingly bearish, driven by the combination of strong production, robust storage levels, and the anticipated drop in heating demand due to milder weather. Unless a significant cold spell returns to the forecasts, traders may need to prepare for continued downward pressure on natural gas futures.

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