U.S. natural gas futures dipped 6% in holiday-thin trading on Tuesday, pressured by record gas production and as mild weather outlook for the short-term limited heating demand.
Front-month gas futures for January delivery on the New York Mercantile Exchange was down 11 cents, or 4.2%, at $2.50 per million British thermal units (mmBtu) at 10:08 EST (1508 GMT). Prices fell as much as 6% earlier in the session.
Trading was thin on the day after Christmas and is expected to remain muted across the shortened week.
“The combination of high natural gas production, low weather related demand because of the holiday and then the moderate temperature forecast is just all turning into a bearish price environment for the natgas market,” said Robert DiDona of Energy Ventures Analysis.
“But, we will end up finding some good support because January is right around the corner and that usually brings the seasonal uplift in total demand estimates.”
Financial firm LSEG forecast U.S. gas demand in the Lower 48, including exports, at 120.8 bcfd this week, down from last week’s 126.6 bcfd, weighed by limited heating demand as businesses and government offices were shut for the Christmas week. However, demand was projected to rise to 133.7 bcfd during the next week as forecast for January gets colder.
LSEG said average gas output in the Lower 48 U.S. states has risen to 108.7 bcfd so far in December from a record 108.3 bcfd in November.
“This supply overhang will be available to meet the needs of an unusually cold January with the weather factor becoming less important during February,” analysts at energy advisory Ritterbusch and Associates said in a note.
Gas flows to the seven big U.S. LNG export plants have risen to an average of 14.7 bcfd so far in December, up from a record 14.3 bcfd in November.