US natural gas futures fell by nearly two per cent on Monday, pressured by higher production and forecasts for warmer weather that could curb heating demand.
Front-month gas futures for January delivery on the New York Mercantile Exchange fell 1.9 per cent, to $3.901 per million British thermal units at 09:40 AM ET (14:40 GMT).
"The production has definitely surprised people, so that is another contributing factor along with the weather forecast that is above normal," said Kyle Cooper, energy market analyst at IAF Advisors.
Financial firm LSEG said that average natural gas output in the lower 48 US states climbed to a record high of 109.9 billion cubic feet per day (bcfd) so far in December, surpassing November's monthly record of 109.6 bcfd.
Meteorologists forecast weather across the country would remain mostly warmer than normal through January 6, keeping the amount of gas needed to heat homes and businesses lower than usual for this time of year.
"While we estimate warmer weather forecasts have removed 102 bcf of support to gas demand out of the 155 bcf of weather-driven support we had estimated in our previous balance, this heating-demand softening is more than offset by incremental price-driven support to forward power demand for gas," Goldman Sachs said in a note.
LSEG projected average gas demand in the lower 48 states, including exports, would rise from 127.5 bcfd this week to 133.3 bcfd over the next two weeks. The forecast for next week was higher than LSEG's outlook on Friday.
Average gas flows to the eight large US liquefied natural gas export plants have risen to 18.5 bcfd so far this month, up from a monthly record high of 18.2 bcfd in November.
"LNG supply is projected to increase by 10 per cent in 2026, the strongest year-on-year growth since before the Covid pandemic. However, just as the LNG market reaches a new peak for capacity coming online, final investment decisions for the next wave of supply will slow," SP Global Energy said in a note.
Natural gas speculators in four major NYMEX and ICE markets increased their net long positions by 7,874 contracts to a total of 239,757 in the week ending December 9, according to data from the US Commodity Futures Trading Commission released on Friday.
An increasing net long position means that traders have added more contracts that bet on a rise in natural gas prices compared to those betting on a decline, reflecting bullish sentiment in the market.
On the geopolitical front, the US Coast Guard is pursuing an oil tanker in international waters near Venezuela, officials told Reuters on Sunday, in what would be the second such operation this weekend and the third in less than two weeks if successful.
Separately, a liquefied natural gas tanker has loaded a cargo from Russia's Portovaya LNG plant that is under Western sanctions over Moscow's war in Ukraine, ship-tracking data showed.
(Reporting by Anmol Choubey in Bengaluru; editing by Barbara Lewis)
