Warm Winter Weather Pressures Natural Gas Prices to 2-Month Lows

Natural gas real time price took another hit this week, with February Nymex contracts closing down -0.173 (-4.91%), marking the continuation of a seven-day downtrend that pushed prices to 2.25-month lows. The culprit? A perfect storm of supply and demand dynamics working against bulls.

Mild Temperatures Kill Heating Demand

Meteorologists are calling for above-normal temperatures across nearly the entire US through January 10, with more seasonable conditions arriving in the second half of January. This weather pattern is the immediate pressure point—less heating demand means less gas consumption, allowing storage facilities to rebuild inventory instead of drawing down supplies. When you pair that with elevated production levels, it’s easy to see why natural gas real time price has retreated so sharply.

Production Surges While Demand Craters

The numbers tell a bearish story. Lower-48 dry gas production hit 112.2 bcf/day on Tuesday, up 8.7% year-over-year according to BNEF data. Meanwhile, actual gas demand collapsed to 89.5 bcf/day—a stunning 25.2% decline compared to the same period last year. This demand destruction is the real story behind the price weakness.

The EIA’s latest forecast didn’t help sentiment either. In early December, the agency bumped its 2025 US natural gas production estimate to 107.74 bcf/day, only marginally higher than November’s 107.70 bcf/day projection. Yet active drilling rigs are hitting two-year highs, suggesting production capacity will remain robust heading into spring.

Storage Telling an Ample Supply Story

Here’s where inventories become critical. The EIA’s weekly report showed natural gas storage fell just 38 bcf for the week ended December 26—well below the market consensus of -51 bcf and dramatically smaller than the five-year average weekly draw of -120 bcf. The takeaway: supplies are rebuilding rather than depleting.

As of late December, inventories were tracking 1.7% above their five-year seasonal average, while sitting 1.1% lower year-over-year. In Europe, the picture is similarly bearish—gas storage at 60% full versus the 73% five-year average for this period.

LNG Exports Moderate

Liquefied natural gas net flows to US export terminals reached 18.5 bcf/day, down 6.0% week-over-week. This modest LNG export pace, combined with weak heating demand and surging production, leaves the market awash in supply.

Electricity Demand—A Silver Lining

The only bright spot came from the electricity sector. US electricity output in the week ended December 6 rose 2.3% year-over-year to 85,330 GWh, with the 52-week period tracking 2.84% higher year-over-year at 4,291,665 GWh. However, this modest electric demand growth isn’t enough to offset the combined weight of warm weather and production gains pressuring natural gas real time price lower.

The Bottom Line

With above-normal temperatures forecast through early January, ample inventories, and robust production—all while demand remains seasonally depressed—the path of least resistance for natural gas prices remains downward until weather patterns normalize and heating season truly kicks into gear.