Natural gas prices experienced a slight increase, closing up 0.20% at Rs 356.9, as the market navigated the tension between near-record production levels and predictions of milder weather coupled with reduced demand in the upcoming weeks. In December, average output in the Lower 48 states held steady at a record 109.6 bcfd, aligning with the peak levels observed in November. Weather forecasts suggest that temperatures will remain predominantly above average until early January, leading to a decrease in heating demand.

LSEG’s estimates indicate a significant decline in average gas demand, including exports, projected to decrease from 144.6 bcfd this week to approximately 127.5 bcfd over the forthcoming two weeks, which is below earlier forecasts. In light of subdued domestic demand projections, LNG exports have nonetheless sustained their momentum, with average flows to principal U.S. LNG terminals increasing to 18.5 bcfd this month, surpassing the record set in November. In terms of storage, U.S. utilities reported a withdrawal of 167 bcf for the week ending December 12, resulting in total stocks of 3,579 bcf.

Inventories currently stand 1.7% lower than the levels observed last year, yet they are 0.9% higher than the five-year average, indicating a generally favorable supply situation. In the future, the EIA anticipates that U.S. gas production and consumption will achieve unprecedented levels by 2025, highlighting a trend of sustained demand growth even in the face of short-term weather-related fluctuations.

The market is currently experiencing short covering, evidenced by a significant decline in open interest, which has fallen by 22.95% to 12,429, alongside a slight increase in prices. Immediate support is identified at Rs 348.8, with additional downside potential toward Rs 340.8. On the upside, resistance is positioned at Rs 361.9, and a sustained move above this level could potentially extend gains toward Rs 367.