Natural Gas NG=F Under Pressure After A 20% Slide From Three-Year High
Short-Term Damage: From Peaks Above $5.10 To The $4.25–$4.33 Zone
Front-month NG=F has given back the entire weather-driven spike and is now trading in the mid-$4s, around $4.28–$4.33 per mmBtu, after dropping roughly $0.85 in a single week, an 8–9% hit layered on top of a broader 20% retreat from the three-year high reached just a week earlier. A week ago, futures sat about $1 higher and briefly priced in an aggressive winter risk premium; today they trade near $4.25, even dipping to a five-week low as sellers force the market below key technical reference points. The price is now marginally under the Energy Information Administration’s updated heating-season average of $4.30 per mmBtu, despite that estimate itself being raised by roughly 10% versus the prior outlook to reflect early-season cold. The message is simple: the strip became too crowded on the upside, weather expectations flipped, and NG=F is repricing lower to reflect less urgent winter tightness.
Weather Whiplash: From Subfreezing Demand Spike To Mild-Into-Christmas Drag On NG=F
The entire move is being driven by a violent swing in weather expectations. Last week’s pattern delivered exactly what bulls wanted: widespread cold across the Midwest and Northeast, with daytime highs in the 10s–30s °F and subfreezing overnight lows, pushing national demand sharply higher and justifying heavy storage withdrawals. That brief window of strong heating demand has now been eclipsed by models projecting above-normal temperatures across most of the Lower 48 from next week through at least December 26. Forecast houses now describe a cold weekend followed by a pronounced warm bias into Christmas, which effectively caps heating loads during what should be the peak of the season. Two-week heating degree days are sitting at 381 versus a 10-year norm of 382 but well below the 30-year norm of 429, signaling that the current cold is not exceptional on a historical basis and that the medium-term pattern is still structurally mild. Traders are no longer willing to pay a winter scarcity premium if the second half of December looks more like a shoulder period than a deep-freeze.
Storage Dynamics: 177 Bcf Withdrawal, 3,746 Bcf In The Ground, And Why Bears Still Dominate
On the surface, the storage data looks bullish. The latest weekly report showed a 177 Bcf withdrawal for the week ended December 5, exceeding the consensus range around -166 to -174 Bcf and dwarfing the five-year average draw of roughly -89 Bcf for this time of year. Last year’s comparable withdrawal was 167 Bcf, so the current pull is larger than both the recent past and the medium-term norm. That confirms that last week’s cold snap genuinely bit into inventories. Yet even after this “massive pull,” total U.S. storage stands near 3,746 Bcf versus 3,774 Bcf a year ago and around 3,643 Bcf for the five-year average, leaving stocks roughly 2.8–3.0% above normal despite the outsized draw. The structural issue all year has been excessive storage: injections were fat through 2025 because production ran at record levels while demand never spiked enough to meaningfully erode the surplus. The current withdrawal merely trims an overhang that was 5.1% above the five-year norm just a week earlier. As long as inventories remain ahead of typical levels going into the core of winter, each large draw gets framed as a temporary weather echo rather than the start of a sustained tightening cycle.
Supply Surge: 109.7 bcfd Output, Record LNG Feedgas And Global Benchmarks Pressuring NG=F
The production side of the balance sheet is relentless. Lower-48 dry gas output is running at about 109.7 bcfd so far in December, marginally above the 109.6 bcfd record set in November and nearly 5 bcfd higher than the roughly 104.6 bcfd level seen a year earlier. When Canadian imports of roughly 10.2 bcfd and small LNG imports are included, total U.S. supply is around 120 bcfd, far above the 108.3 bcfd five-year average for this month. On the demand side, aggregate U.S. usage including exports is about 145.4 bcfd this week, projected to ease to 143.8 bcfd next week as the weather warms, compared with roughly 129.5 bcfd for the five-year average. So demand is robust, but supply is so strong that storage remains comfortable even with heavy withdrawals. LNG feedgas flows are near record territory at 18.7–18.9 bcfd, up from 18.2 bcfd in November and around 13.7 bcfd a year ago, with exports on track to hit a new high for the tenth consecutive year. Yet global benchmarks are not providing much relief: European TTF prices hover near $9.20 per mmBtu and Asian JKM around $10.78, while Henry Hub trades near $4.48–$4.62. That spread is healthy enough to support U.S. exports but not tight enough to trigger a panic bid. The combination of record domestic output, well-supplied global markets, and only moderately supportive international prices keeps a lid on any attempt by NG=F to sustain moves back above recent highs.
Technical Structure: Broken $4.495 Support, $4.39 Failure And $4.05–Sub-$4 Downside Risk
Technically, NG=F has shifted from an overextended bullish structure into a clear corrective phase. The first red flag was the decisive break below $4.495, a level aligning with the 50-day moving average and acting as a key pivot for systematic and trend-following flows. Once that floor gave way, algorithmic accounts and leveraged longs started liquidating, driving the contract through the prior swing low at $4.390 and exposing the late-October bottom around $4.052 as the next meaningful downside reference. The current tape around $4.28–$4.33 is uncomfortably close to that October low, and the recent price action has been characterized by big red candles and follow-through selling rather than sharp V-shaped reversals. Technicians now see the path of least resistance skewed toward at least a test of the $4.05 region and a realistic risk of a temporary break below $4.00 if weather models stay warm and storage draws continue to be framed as one-off events. The previous three-year high is now firmly established as resistance, and every failure to reclaim the $4.49–$4.60 congestion zone reinforces the view that the winter spike has already peaked.
Regional And Basis Signals: Henry Hub Anchored, New England Spikes And Permian Discounts
Underlying regional price behavior confirms that the weakness in NG=F is not simply a benchmark anomaly. Spot Henry Hub has slipped to about $4.62 versus $4.76 recently, broadly aligned with the front-month futures slide. However, regional differentials highlight how localized constraints are distorting signals. New England’s Algonquin Citygate is printing extreme numbers near $20.50 per mmBtu, up from around $16.55, reflecting pipeline limitations and winter reliability concerns in that constrained market. At the same time, Permian Waha prices are deeply negative around -$1.31 versus -$0.98 the prior day, exposing severe takeaway bottlenecks and periodic dumping of associated gas at distressed levels. Chicago Citygate sits near $4.35, Transco Zone 6 New York around $5.63, and PG&E Citygate roughly $3.75, underscoring a patchwork of tightness in some load pockets and oversupply in others. For NG=F, which reflects Henry Hub rather than local stress, the key takeaway is that the national system is adequately supplied. New England’s price spikes are a seasonal, infrastructure-driven phenomenon, while Permian discounts signal surplus molecules searching for demand rather than scarcity.
Demand Mix: Heating, Power Generation, LNG Exports And Data Center Uncertainty
On the consumption side, the demand stack is robust but not explosive. Commercial usage sits around 17.6–18.0 bcfd, residential demand approximately 29.6–30.3 bcfd, and industrial consumption near 26.0 bcfd. Power sector burn is roughly 32.7–34.9 bcfd, slightly down from last year’s record high and projected to soften as temperatures rise and coal, nuclear, wind and solar share some of the load. Gas still accounts for about 39–40% of U.S. power generation, but incremental growth from this segment is flattening for 2025 compared with the surge in 2024. Exports remain a bright spot: roughly 6.3 bcfd flows to Mexico, around 3.5 bcfd to Canada, and nearly 18.5–18.9 bcfd heads to LNG terminals. Even so, worries are emerging around the long-term trajectory of gas-fired power demand for data centers. A recent selloff in high-profile technology stocks linked to artificial intelligence infrastructure has raised questions about the pace and profitability of new data center build-out, which had been one of the pillars of bullish gas demand narratives. If power demand growth for data centers underperforms, gas burns for electricity could plateau or even decline at the margin, reducing one of the structural arguments for sustained high prices. For the current winter window, the dominant driver remains weather: national demand is projected to slip from about 145.4 bcfd this week to 143.8 bcfd next week, and that marginal downtick—from already elevated levels—matters more for price direction than the longer-term AI story.
Macro Backdrop For NG=F: Degree Days, Global Prices And Consumer Bills
The broader macro context supports a softer stance on NG=F for now. Degree-day data show that, while the recent cold was meaningful, the two-week total is not significantly above historical norms, and the forward projections are tilted toward warmth rather than sustained Arctic outbreaks. Global gas prices at roughly $9–$11 per mmBtu are far from crisis levels; they are high enough to keep U.S. LNG exports running hard but low enough to discourage panic hedging from overseas buyers. Domestically, the recent 20% price drop from the three-year high has real implications for heating bills: with NG=F around $4.25 instead of above $5, the implied cost trajectory for winter is easing, differing notably from early-season fears of a punishing heating season. For utilities and large end-users, this environment encourages more measured hedging rather than frantic procurement, which in turn removes one source of upside pressure from the futures curve.
Scenario Framework For NG=F Into Year-End And Early 2026
From here, the near-term scenarios revolve around three interacting variables: weather, storage, and production discipline. In a continued warm-into-Christmas path with withdrawals roughly in line with the current 170 Bcf range, NG=F is likely to probe the $4.05 October low and may briefly crack below $4.00 as speculative longs capitulate. In a moderate scenario where the next storage print surprises on the high side of expectations and weather models reintroduce a colder pattern for late December and early January, the contract could stabilize in a $4.20–$4.70 band, with the $4.49–$4.60 region acting as a ceiling until evidence of sustained tightness emerges. Only in a more aggressive cold-reversion scenario—multiple weeks of below-normal temperatures, withdrawals persistently above the five-year average, and any sign of production flattening from the current 109.7 bcfd—does a retest of recent highs become plausible, with upside extensions back above $5.00. So far, none of those bullish conditions are firmly in place. Storage remains about 2.8–3.0% above the norm, output is at record levels, and medium-range forecasts favor warmth. That combination argues against paying up now for a weather risk that is not yet visible on the charts.
Trading Stance On NG=F: Bearish Bias With Tactical Hold, Not An Aggressive Buy
Putting all of the data together—20% price erosion from the three-year high to around $4.25, a weekly loss of roughly $0.85, a 177 Bcf draw that still leaves storage at 3,746 Bcf and about 3% above the five-year average, record Lower-48 production at 109.7 bcfd, LNG feedgas near 18.9 bcfd, global benchmarks at $9–$11, and a clearly broken technical structure below $4.495 and $4.390—the current setup for NG=F is short-term bearish with a medium-term equilibrium bias. For directional traders, the risk-reward does not justify a fresh long until either weather or supply conditions change meaningfully. For portfolio positioning, the stance is a tactical hold with a downside skew rather than an outright buy: the market is vulnerable to further tests of $4.05 and potentially sub-$4 levels if mild weather and heavy output persist, while any sustainable move back above $4.70–$4.90 will require a clear shift in either storage trends or production behavior. In other words, NG=F is not priced for disaster, but it is also not offering a compelling entry for bulls yet; the balance of evidence favors patience or cautious, short-biased strategies until the data stop confirming oversupply.
That’s TradingNEWS
