Natural Gas Prices Slide to $4.60 (NG=F) After Two-Day 13% Drop — EIA Still Sees $5 Average

Natural Gas (NG=F) Price Analysis — December 9, 2025: Futures Drop 6.3% to $4.60 as Warm Weather Outlook, High Inventories, and Strong LNG Supply Pressure Winter Rally

Natural Gas Market Overview

Natural Gas (NG=F) futures extended their sharp retreat on Tuesday, falling 6.33% to $4.601/MMBtu, marking their lowest level since November 26. The decline adds to Monday’s 7.1% loss, forming the steepest two-day drop since April 2025. The pullback came as weather models shifted toward milder mid-December forecasts, trimming expectations for deep winter heating demand across the U.S. and Europe. Traders are unwinding long positions after last week’s failed breakout above the $5.00 resistance, which had been reinforced by cold front expectations that failed to materialize. The Henry Hub benchmark now trades at a key inflection point, where both fundamental oversupply and fading speculative momentum collide.

Impact of Weather Models and Seasonal Storage

Meteorological updates from multiple forecasters show temperatures across the eastern U.S. trending “less cold and more normal” heading into late December, weakening the demand narrative that had driven the prior week’s spike. The Energy Information Administration (EIA) reported storage at 3.923 trillion cubic feet (tcf) as of November 28 — 191 billion cubic feet above the five-year average — reinforcing ample supply conditions even as winter heating season intensifies. Analysts note that milder conditions have slashed projected withdrawals for December, suggesting a more modest refill requirement in the summer of 2026, reducing forward price pressure.

The 50-day moving average around $4.18 remains a short-term technical pivot, while the $4.00 mark acts as psychological support. Any sustained break below this level could trigger algorithmic selling and reopen downside targets near $3.70–$3.80, last seen in early October. However, if cold revisions return or LNG feedgas demand strengthens further, price recovery toward $4.90–$5.00 remains plausible.

EIA and LNG Demand Outlook

According to the EIA’s updated short-term energy outlook, Henry Hub spot prices are expected to average $4.30/MMBtu during the 2025–2026 winter, supported by higher heating loads and robust U.S. LNG export demand. Futures pricing beyond Q1 2026 already implies an average near $5.00, suggesting traders anticipate renewed tightening later in the season. The EIA forecasts 2026 annual averages near $4.01, compared with $2.54 in 2024, signaling a structural rebound driven by global gas flows rather than short-term weather effects.

U.S. LNG exports, now at record levels, remain the most critical balancing mechanism in the global natural gas market. Export terminals are currently operating at above 14.5 billion cubic feet per day (Bcf/d), absorbing domestic supply surpluses and redirecting them to Europe and Asia. The Golden Pass LNG terminal in Texas, nearing operational launch, is expected to add incremental export capacity early next year, further lifting structural demand for Henry Hub-linked gas.

European Market Pressure and Global Supply Dynamics

In Europe, natural gas prices continue to trade near multi-year lows, with Dutch TTF contracts at €27/MWh, down over 45% year-to-date and more than 90% below their 2022 crisis peaks. The collapse reflects an oversupplied market underpinned by U.S. LNG shipments now accounting for 56% of Europe’s total imports, and consistently strong Norwegian pipeline flows. Despite EU storage levels slipping to 72% full as of December 7 — below the 90% target — weaker heating demand, strong wind power generation, and mild weather have offset any shortage concerns.

Meanwhile, geopolitical tensions between Ukraine and Russia appear to be easing slightly, with diplomatic signals suggesting progress toward a negotiated settlement. Any softening of EU sanctions on Russian energy exports in 2026 would further dilute price support for LNG-linked benchmarks, potentially reducing arbitrage spreads and pressuring U.S. export margins.

U.S. Market Technical Behavior and Contract Positioning

Technically, Natural Gas (NG=F) remains in a corrective downtrend after failing to sustain its move above $5.00. The January 2026 contract (NGF26) rolled over with heavy volume as traders transitioned to February delivery. The $5.00 ceiling has repeatedly served as a multi-year resistance level, with sellers defending it aggressively since 2021. A retracement toward $4.50–$4.20 aligns with the cyclical pattern of winter overextension followed by profit-taking, as observed during prior December trading cycles.

Short-term momentum oscillators indicate heavy liquidation, but long-term trend models remain mildly bullish as the 200-day average holds near $4.10. Historically, February contracts tend to stabilize before resuming an upward move through mid-winter when demand peaks across the U.S. Northeast. However, this year’s pattern is complicated by global LNG oversupply and subdued Asian spot demand, both of which reduce upside elasticity.

Industrial and Data Center Demand Shifts

Beyond weather-driven consumption, structural demand from AI data centers and power-intensive infrastructure remains a debated variable. The expansion of U.S. cloud and data processing facilities, particularly in Texas, Virginia, and Ohio, is adding incremental load to the grid, much of which is indirectly powered by natural gas. Current estimates suggest AI data centers could contribute an additional 1.2 Bcf/d in natural gas demand by late 2026, offsetting part of the seasonal variability.

However, analysts caution that this demand is highly uneven and often speculative. If AI-driven electricity expansion slows or capital expenditure in data centers softens in 2026, natural gas could lose one of its newly priced-in growth pillars, amplifying downside risk once heating demand fades in spring.

North American Fundamentals and LNG Infrastructure Expansion

The U.S. Lower 48 production remains above 100 Bcf/d, keeping supply pressure elevated even as storage levels hover above historical norms. Pipeline operators in the Permian Basin report persistent congestion, while regional benchmarks like Waha Hub occasionally trade near or below zero due to bottlenecks and excess associated gas from crude production. Meanwhile, demand along the U.S. Gulf Coast continues to surge as multiple LNG projects, including Plaquemines, Golden Pass, and Port Arthur, advance toward commissioning in early 2026. These facilities combined are expected to boost total export capacity beyond 17 Bcf/d, reinforcing the U.S.’s dominance in the global LNG market.

The infrastructure pipeline also includes expansion in Mexico’s Sur de Texas–Tuxpan corridor, improving cross-border connectivity and helping monetize excess U.S. supply while stabilizing regional basis differentials.

Macro Correlations and Investor Positioning

Investor sentiment toward natural gas has turned defensive but not outright bearish. Commodity Trading Advisors (CTAs) reduced net longs by 12% last week, according to CFTC data, while commercial hedgers increased protective short positions. Open interest remains high at 1.29 million contracts, suggesting continued speculative engagement. The U.S. Dollar Index at 96.66 and 10-year Treasury yield at 4.18% add mild headwinds for dollar-denominated commodities, although these macro effects remain secondary to weather and storage trends.

Equities linked to the gas sector — including Cheniere Energy (NYSE:LNG), Tellurian (NYSE:TELL), and Range Resources (NYSE:RRC) — have mirrored the commodity pullback, shedding 2–5% intraday, as traders recalibrate Q1 margin expectations.

Short-Term Price Outlook and Verdict

The immediate outlook for Natural Gas (NG=F) remains corrective as the market digests a combination of milder temperatures, robust storage, and LNG-driven equilibrium. Short-term technicals suggest consolidation between $4.40 and $4.90, with downside risks toward $4.10 if weather models continue to favor warmth. The broader structural backdrop — underpinned by tightening supply-demand balance through 2026 — remains supportive beyond the current pullback.

Current Price: $4.601/MMBtu
Support Zone: $4.00–$4.20
Resistance Levels: $4.90–$5.00
Storage: 3.923 tcf (+191 bcf vs 5-year average)
LNG Exports: 14.5 Bcf/d (record high)
European TTF: €27/MWh (–45% YTD)

Verdict: Hold — Near-Term Bearish Bias, Long-Term Structural Bullishness Toward $5.00 Once Winter Demand Tightens and LNG Flows Accelerate

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