US natural gas prices are retreating in the final session of the year, a move likely driven by profit-taking following a recovery from the local troughs recorded on December 22. The decline comes despite an unusual fundamental tightening earlier this month; the first three weeks of December saw storage withdrawals exceeding 160 bcf—a rare occurrence for the period. According to the latest inventory report for the week ending December 19, stockpiles fell below the five-year average for the first time since April. However, the market’s focus has shifted to a warm spell at the end of December, which is forecast to persist until at least January 13. Consequently, storage draws over the next three reporting cycles are expected to remain subdued.
While seasonal outlooks from the National Oceanic and Atmospheric Administration (NOAA) do not currently signal an imminent Arctic blast, meteorologists point to a high probability of a cold front developing after mid-January. Furthermore, with LNG exports hitting record highs, aggregate demand is expected to remain robust. US-based forecasting firms anticipate prices to remain flat or trend lower over the next 7 to 10 days, followed by a potential recovery on a 30-to-45-day horizon. Notably, the forward curve remains in steep backwardation through April.
Current weather models indicate temperatures will remain above seasonal norms for the next fortnight.
Technical Analysis
Prices are enduring a significant pullback today which, coupled with yesterday’s price action, suggests the formation of a "shooting star" pattern. A close at these depressed levels may signal the end of the recent corrective rally within the broader downtrend. In such a scenario, the market may look to test critical support near the 100- and 200-day moving averages at the $3.6/MMBtu mark.
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