US natural gas futures drop 7% to 12-week low on mild weather forecasts

By Scott DiSavino

NEW YORK, Jan 9 (Reuters) - U.S. natural gas futures fell about 7% to a 12-week low on Friday on forecasts for mild weather and lower heating demand over the next two weeks than previously expected.

Front-month gas futures for February delivery NGc1 on the New York Mercantile Exchange fell 23.8 cents, or 7.0%, to settle at $3.169 per million British thermal units, their lowest close since October 17.

That move put the contract down about 12% for the week, pushing it into technically oversold territory, after it fell about 17% last week.

The futures decline also helped reduce the stock prices of the two biggest U.S. gas producers with Expand Energy EXE.O down about 2.7% to its lowest since October and EQT EQT.N down about 2.4% to its lowest since September.

Looking ahead, the market is showing that traders are not worried about having enough gas in storage for the winter. The spread between futures for March over April 2026 NGH26-J26 traded at a record deficit of around 4 cents per mmBtu. Analysts have said that April should not trade above March since demand for gas for heating is higher in March.

Separately, the premium of futures for November over October NGV26-X26 rose to the highest since November 2024.

The industry calls the March-April spread the "widow-maker" because rapid price moves resulting from changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

Traders use the March-April and October-November spreads to bet on winter weather forecasts and supply and demand. March is the last month of the winter heating season when utilities pull gas out of storage, and October is the last month of the summer cooling season when utilities inject gas into storage.

In the cash market, average prices at the Waha Hub NG-WAH-WTX-SNL in the Permian Shale in West Texas remained in negative territory for a second day in a row and the third time this year as pipeline constraints trapped gas in the nation's biggest oil-producing basin.

Waha prices have averaged a negative 66 cents per mmBtu so far this year, compared with $1.15 in all of 2025 and a five-year average (2021-2025) of $2.88.

Daily Waha prices first averaged below zero in 2019. They did so 17 times in 2019, six times in 2020, once in 2023, a record 49 times in 2024, and 39 times in 2025.

SUPPLY AND DEMAND

Financial firm LSEG said average gas output in the Lower 48 states has fallen to 109.2 billion cubic feet per day (bcfd) so far in January, down from a monthly record high of 109.7 bcfd in December.

Despite colder-than-normal forecasts for January 18-19, meteorologists projected weather across the country would remain mostly warmer than normal through January 24, keeping the amount of gas needed to heat homes and businesses lower than usual for this time of year.

LSEG projected average gas demand in the Lower 48 states, including exports, would rise from 131.9 bcfd this week to 133.1 bcfd next week and 143.6 bcfd in two weeks. The forecast for next week was lower than LSEG's outlook on Thursday.

Average gas flows to the eight large U.S. LNG export plants have held around 18.5 bcfd so far in January, the same as December's monthly record-high average.