Front-month gas futures for January delivery on the New York Mercantile Exchange were down 15.2 cents, or 4.5%, at $3.21 per million British thermal units at 9:23 a.m. EST (1423 GMT), hitting its lowest level since Nov. 22.
“The combination of the higher production estimate and the heating degree days getting dropped out of the short-term weather models is causing the sell-off,” said Robert DiDona of Energy Ventures.
LSEG estimated 376 heating degree days over the next two weeks, lower than the forecast for 402 HDDs on Friday. LSEG forecast average gas demand in the Lower 48 U.S. states, including exports, would drop from 134.9 bcfd this week to 129.5 bcfd next week.
“For the first half of December, things look fairly bullish. And we’re seeing a drawdown of storage, which is helping to reduce some of that storage surplus. So I think that should be a net positive here,” DiDona added.
The U.S. Energy Information Administration on Thursday showed utilities pulled an expected 2 billion cubic feet of gas from storage week ending Nov. 22. Early estimates for the week ending Nov. 29 ranged from withdrawals of 6 bcf to 53 bcf, with an average decrease of 38 bcf.
LSEG said average gas output in the Lower 48 rose to 101.8 billion cubic feet per day so far in December, from 101.4 bcfd in November. That compares with a record 105.3 bcfd in December 2023.
Analysts expect producers to boost gas output in 2025 as rising demand from liquefied natural gas export plants increases prices after drillers reduced production in 2024 for the first time since the COVID-19 pandemic.
“Natural gas inventories are elevated but heating demand is expected to pick up and despite uncertainty about the extent of spare capacity, we think risks to prices are skewed higher given the inherent lag in supply from new activity and a cautious stance from operators,” Barclays said in a note dated Nov. 29.
Elsewhere, the European benchmark gas contract hit its highest level in 13 months on Monday morning as flows of Russian gas via Ukraine eased slightly, there were forecasts for colder weather, and as gas storage levels in Europe continued to decline.
(Reporting by Anushree Mukherjee in Bengaluru; editing by Jonathan Oatis)
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