Are Warm Weather Models the Final Nail for Winter Bulls?
The main drag remains the weather. Forecasts from NatGasWeather and Atmospheric G2 show the 11-15 day outlook softening significantly, wiping out previously expected heating degree days. After a short-lived cold push through Monday, the rest of the week is expected to bring above-normal temps across most of the Lower 48, killing any momentum for sustained high heating demand. Traders have been aggressively dumping length as confidence in a sustained cold pattern continues to erode.
Even last weekend’s slightly cooler revision to the Dec 17–27 period didn’t help. The market sniffed out that it wasn’t enough — and more importantly, not soon enough — to keep the floor intact. The break below October’s $3.913 low opened the door for further technical weakness, and the tape responded accordingly.
Production Keeps Piling On as Demand Lags
On the supply side, production remains uncomfortably high. Monday’s dry gas output hit 113.1 Bcf/d, up nearly 9% year-over-year, according to BNEF. That’s putting pressure on the demand side to deliver, and so far, it isn’t. While early-week demand was reported at 125.5 Bcf/d, that figure was propped up by residual cold and isn’t expected to hold as temps warm up.
LNG flows offer no rescue. Net flows to U.S. export terminals came in at 16.8 Bcf/d, down 5.4% week-over-week. Global LNG pricing has also retreated from recent highs, muting upside incentives for U.S. cargoes. The market clearly isn’t pricing in a rescue from the export side — not yet.
Is the Bullish Storage Draw Already Priced In?
Last week’s EIA report showed a solid -177 Bcf draw, well above the five-year average of -89 Bcf. That would usually be fuel for a bounce. But in this tape, it barely moved the needle. Traders appear to be discounting bullish storage prints in the face of weak forward demand and relentless supply. With inventories still sitting 2.8% above their five-year average, the market isn’t panicking — it’s repositioning.
Rig counts provide a sliver of relief — down two last week to 127 — but that’s still hovering just below a 2.25-year high. In other words, production growth isn’t stopping.
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