US natgas futures tumble 6pc on mild weather outlook, higher output

US natural gas futures dropped 6% to a two-month low on Monday, weighed down by forecasts for milder weather that could result in lower heating demand over the next two weeks and a steady rise in production.

Front-month gas futures for January delivery fell 15.2 cents, or 5.9%, to $2.423 per million British thermal units by 1:15 p.m. EST (1815 GMT), after touching its lowest since Oct. 2 at $2.381 earlier in the session.

"Weekend updates to the short-term temperature views were again tilted bearish with reliable two-week outlooks still indicating above normal patterns spread broadly across the US, especially within key consuming regions," advisory firm Ritterbusch and Associates said in a note.

"In the absence of some bullish weather forecasts, this market may need to price in some further expansion in the supply surplus that has stretched considerably in recent weeks."

Data provider Refinitiv estimated 321 heating degree days (HDDs) over the next two weeks in the lower 48 US states, well below the 30-year average of 422. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). The measure is used to estimate demand to heat homes and businesses.

Refinitiv said output in the Lower 48 US states averaged 90.9 billion cubic feet per day (bcfd) so far in December. That compares with a seven-month high of 91.0 bcfd in November 2020.

Refinitiv predicted demand, including exports, would rise to an average of 117.8 billion cubic feet per day (bcfd) this week from 113.4 bcfd in the prior week

The amount of gas flowing to US LNG export plants, meanwhile, rose to an average of 10.4 bcfd so far in December, which would top November's 9.8-bcfd record.