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NEW YORK: US natural gas futures fell about 4% to a two-week low on Tuesday on rising output and forecasts for milder weather and less heating demand next week than previously expected.

Front-month gas futures for January delivery on the New York Mercantile Exchange fell 12.1 cents, or 3.8%, to $3.092 per million British thermal units (mmBtu) at 10:09 a.m. EST (1509 GMT), putting the contract on track for its lowest close since Nov. 19.

Looking ahead, the market is showing signs of giving up on thoughts that extreme cold could cause prices to spike this winter with futures for March 2025 trading at a record low premium over April 2025 of just 1 cent per mmBtu.

March is the last month of the winter storage withdrawal season and April is the first month of the summer storage injection season.

Since gas is primarily a winter heating fuel, traders have said summer prices should not trade above winter.

If the March-April 2025 contract trades in contango, with the April contract priced higher than March, it could be the earliest switch from backwardation, with the March contract priced higher than April, in recent years.

The March-April 2024 spread did not trade in contango until Dec. 13. That compares with Jan. 25 for the March-April 2023 spread, never for the March-April 2022 spread and Dec. 8 for the March-April 2021 spread, according to seasonality data from LSEG.

The industry calls the March-April spread the “widow maker” because rapid price moves on changing weather forecasts have forced some speculators out of business, including the Amaranth hedge fund, which lost more than $6 billion in 2006.

In the spot market, meanwhile, the coming of wintry weather across parts of the US caused gas prices to rise to their highest since January in several regions, including the Waha hub in West Texas, Algonquin in New England, New York and at the Southern California Border.

Next-day gas prices at the Algonquin jumped to $14.29 per mmBtu, boosting spot power prices to a four-month high of $122 per megawatt hour in the pipeline-constrained New England region.

Power and gas prices usually spike in New England when the winter weather turns cold because there is not enough gas pipeline capacity into the six-state region to both fuel power plants and heat homes and businesses. That forces several generators to switch to more expensive oil and liquefied natural gas (LNG) to fuel their power plants.

Financial firm LSEG said average gas output in the Lower 48 US states rose to 101.9 billion cubic feet per day (bcfd) so far in December, up from 101.5 bcfd in November. That compares with a record 105.3 bcfd in December 2023.

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