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Warmer Weather Sinks US Natural Gas Prices
10 Jan
Summary
- February natural gas prices hit a 2.5-month low due to warmer weather forecasts.
- US natural gas production is near a record high with active rigs at a 2-year peak.
- Inventories saw a larger than expected draw, but supplies remain ample.
Natural gas prices for February futures have plunged to a 2.5-month low, driven by an anticipated surge in warmer temperatures across the United States. Forecasts indicate milder weather from January 9-15 and even warmer conditions for January 16-23, significantly curbing the need for heating and allowing natural gas storage levels to increase.
Adding to the bearish sentiment, US natural gas production is currently near an all-time high. The Energy Information Administration (EIA) revised its 2025 production forecast upward, while active natural gas rigs recently reached a two-year peak. This robust production, coupled with reduced demand due to milder weather, has put considerable downward pressure on prices.
Despite a significant inventory draw of -119 billion cubic feet for the week ending January 2, which was much larger than market expectations, overall US natural gas supplies remain ample. As of January 2, inventories were down 3.5% year-over-year but still 1.0% above the five-year seasonal average. In contrast, European gas storage stood at 58% full, below its five-year average.
