US natural gas futures dropped by around 1% to $3.90/MMBtu on Monday, retreating from a two-year high reached the previous session, despite a 10% surge earlier in the day. The decline came even as forecasts for colder weather and higher heating demand loomed, with freezing pipelines and reduced flows to Freeport LNG's export facility in Texas limiting supply. Storage withdrawals in January are expected to be substantial, possibly surpassing the 2022 record of 994 billion cubic feet, which could erase the current surplus and drive stockpiles below the five-year average. Severe cold has pushed next-day gas prices at major hubs, such as the Henry Hub in Louisiana, to multi-year highs. Meanwhile, production in the Lower 48 states has been hindered by freeze-offs, with average output falling to 103.1 billion cubic feet per day this month. With colder-than-normal temperatures expected through late January, the natural gas market remains highly sensitive to shifts in supply and demand.
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