U.S. natural gas futures experienced a sharp decline, completely erasing the gains achieved last Friday, driven by short-term weather forecasts indicating a turn towards milder conditions. Data reveals that, at the time of writing, the front-month natural gas futures contract had plummeted over 15%, trading at $3.699 per million British thermal units. This drop follows an 11% surge last Friday, which occurred ahead of an anticipated record-breaking cold wave.

Despite the intense cold currently sweeping across the southern United States, which has prompted local power conservation measures, the broader weather outlook through mid-month points to generally more temperate conditions. According to data from the National Oceanic and Atmospheric Administration (NOAA), temperatures across large swathes of the U.S. are expected to exceed seasonal norms. This development is likely to suppress demand for natural gas, a primary fuel used for heating and electricity generation.

U.S. natural gas futures have exhibited significant volatility over the past several weeks. The February contract, before its expiration last Wednesday, had surged to a three-year peak, primarily propelled by a winter storm that disrupted production and amplified heating demand. Subsequently, the March contract saw another price increase last Friday as traders digested conflicting weather forecasts alongside a government inventory report that was viewed as bullish for prices.