US natural gas futures are down more than 8% on Monday afternoon following warmer weather forecasts that will result in lower energy demand for the next couple of weeks.
Front-month natgas futures were down -8.45% at 2.742 per million British thermal units at 1335 ET.
Robert DiDona of Energy Ventures Analysis told Reuters that "natural gas futures were lower this morning as supply held steady over the weekend and weather model outlook is showing a forecast that is warmer-than-normal over the next two to three weeks."
"This warmer weather outlook has negatively impacted weather-related demand which will loosen the end of season storage forecast," said DiDona.
Data provider Refinitiv estimated heating degree days for the US-Lower 48 will be well below trend through November.
"Adding to bearish pressures has been a lift in production of late that has been combining with a quicker-than-expected rebound in the rig counts to exert additional psychological bearish price pressure," advisory firm Ritterbusch and Associates said in a note.
Last month, natgas futures soared to two-year highs on increased energy demand speculation following weather outlooks that forecasted colder weather.
However, there's some good news as exports of natgas have risen to a record, helping to reduce domestic stockpiles. But the biggest hurdle, at the moment, is winter gas demand will remain lackluster as temperatures will be above average for some parts of the country.
Unless frigid weather arrives soon, natgas futures will likely stay below the psychological $3 handle.
"The market action in natural gas reminds me that I should not trust long term weather forecast," wrote Phil Flynn, senior market analyst at Price Futures Group, who was quoted by Bloomberg.
"The fundamentals on natural gas look supportive but if we get another warm winter, natural gas may just stay about where it is," wrote Flynn.
On the flip side, warmer weather is terrific news for the restaurant industry that has been heavily restricted in indoor dining capacity and must rely on outdoor seating to serve customers.