US natural gas futures fall 7% on mild weather forecasts, data center demand worries

By Scott DiSavino

NEW YORK, Dec 11 (Reuters) - U.S. natural gas futures dropped about 7% on Thursday to a five-week low on forecasts for milder weather and lower demand next week than previously expected, near-record output, ample amounts of gas in storage, worries about future gas demand for power generation for data centers, and a reduction in gas prices around the world.

Front-month gas futures for January delivery NGc1 on the New York Mercantile Exchange fell 30.7 cents, or 6.7%, to $4.288 per million British thermal units (mmBtu).

That price decline occurred despite a bigger-than-expected storage withdrawal, as consumers burned more gas than normal to keep their homes and businesses warm during extreme cold last week.

The U.S. Energy Information Administration (EIA) said energy firms pulled 177 billion cubic feet (bcf) of gas out of storage during the week ended December 5.

That figure exceeded the 166-bcf withdrawal analysts forecast in a Reuters poll and compared with a decline of 167 bcf during the same week last year and an average withdrawal of 89 bcf over the past five years (2020-2024). EIA/GAS NGAS/POLL

In the stock market, Oracle ORCL.N shares slumped more than 15% earlier on Thursday, dragging other technology stocks down, as concerns mounted about the company's massive artificial intelligence (AI) spending and the lack of a clear timeline on returns from the investments.

Analysts said the technology stock drop could be a problem for gas prices since the two primary sources of gas demand growth in recent years have been from liquefied natural gas (LNG) exports and gas burned to produce electricity for power-hungry data centers. While LNG exports remain on track to hit a record high for a tenth year in a row in 2025, power demand for gas was on track to decline in 2025 after hitting a record high in 2024.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states has risen to 109.7 billion cubic feet per day (bcfd) so far in December, up from a monthly record high of 109.6 bcfd in November.

Record output has allowed energy companies to stockpile more gas than usual, leaving the amount of fuel in storage at about 3% above normal for this time of year. EIA/GAS NGAS/POLL

Meteorologists forecast weather across the country would remain mostly warmer than normal through December 26, keeping the amount of gas needed to heat homes and businesses lower than usual during that time.

LSEG projected average gas demand in the Lower 48 states, including exports, would slide from 145.4 bcfd this week to 143.8 bcfd next week. The forecast for next week was lower than LSEG's outlook on Wednesday.

Average gas flows to the eight large U.S. LNG export plants have risen to 18.7 bcfd so far this month, up from a monthly record high of 18.2 bcfd in November.

Around the world, gas prices held near 19-month lows of about $9 per mmBtu at the Dutch Title Transfer Facility (TTF) TRNLTTFMc1 benchmark in Europe and $11 at the Japan-Korea Marker (JKM) JKMc1 in Asia.