Natural Gas Prices Rebound Slightly After Hitting Six Week Lows

Milder Weather Dominates

The primary driver for the recent drop below $4.2/MMBtu was the revision of weather forecasts predicting warmer-than-normal conditions through late December. This outlook significantly curbs expectations for heating demand, resulting in lighter-than-expected withdrawals from storage and reducing the need for spot purchases.

Record Supply and Storage Cushion

Domestic output in the Lower 48 states continues to hover near record highs. Coupled with the subdued demand, this strong supply is keeping storage levels about 3% above seasonal norms. The ample inventory cushion removes the 'scarcity premium' that often drives prices higher during winter months.

LNG Export Strength

The main bullish factor remains LNG feedgas demand, which has climbed to a new monthly high. High export volumes to Europe, which seeks to offset reduced Russian flows, provide a structural floor for prices. However, this demand is currently insufficient to overcome the bearish combination of weak weather and high production.