Natural Gas Prices Collapse In Largest Loss Of 2025 As Bears Steamroll The Bulls; Is It Over Yet?
6:00 AM EDT, Saturday, December 13, 2025
What an up-and-down month.
The Friday before last, the arctic air was unending and the bulls were in control, driving prices to a 3-year closing high of $5.28/MMBTU. Fast forward a week and gas prices tumbled four out of five sessions to log a gargantuan -22.2% weekly loss to $4.11/MMBTU. It was the largest weekly decline of the year. Even with the sell-off, prices are still up +25.4% year-over-year and remain at the second highest level for the date in the last 5 years, below only 2022’s $6.59/MMBTU.
Last week’s losses lay squarely at the feet of Mother Nature. After an exceptionally cold early-to-mid December temperature outlook, the near-term models pivoted abruptly last week, calling for a breakdown in the supportive temperature pattern beginning later in the upcoming week. This will result in exceptional cold across Alaska but a much milder second half of the month over essentially the entire Lower 48, especially across the Central and Southern US, as shown in the 8-14 day temperature outlook in the Figure to the right.
With prices very overextended after the early-month rally, this pattern shift was a recipe for a sell-off for the ages. That is what we deserved, and that is exactly what we got.
This weekend, the most potent reinforcing shot of arctic so far this season will bring record cold to the Great Lakes. Next week and into the following week will see a rapid pattern shift, cutting forecast Gas-Weighted Degree Days (GWDDs) in half. I am projecting very bullish weekly storage withdrawals of -162 BCF for the week ending December 12 (5-year average: -96 BCF) and -156 BCF for the week ending December 19 (5-year average: -110 BCF) tumbling to just -62 BCF for December 20-26 (5-year average: -120 BCF). This shift is essentially a certainty and is largely priced in.
What matters now will be the forecast for the final week of December and the first week of January. As shown in the Figure to the right, forecast GWDDs remain below-average for the entire period. When will that change? This will be the Figure to monitor this weekend and over the next week or two.
Also worth keeping an eye on: the new Golden Pass LNG export facility had a “cooldown” cargo arrive on site this week, marking a major step forward as the facility gears up to begin exports in the next month or two. This week, the facility saw new flows rise to a “record” 0.018 BCF/day, still only a fraction 0.7% capacity. Nonetheless, when Golden Pass does come online, it could result in a rapid jump in LNG export demand. Total LNG feedgas volumes are already hovering just under record highs of 19 BCF/day, up +4.5-5.5 BCF/day and countering gains in production. With Golden Pass, flows will quickly jump above 20 BCF/day, breaking this balance and further tightening supply/demand imbalances.
This past week’s sell-off did take significant pressure off of the commodity. As shown in the Figure to the right, the front-month January contract has seen its overvaluation tumble from over +50% to just +21%. The December contract has narrowed from nearly 30% overvalued to just 4% overvalued. And, beginning with the March 2026 contract, the Shoulder Season and Cooling Season contracts are all comfortably undervalued in anticipation of a tighter supply/demand imbalance. Last weekend, investors were inherently bullish and assumed that the arctic air would occur indefinitely. When it didn’t, prices cratered. Heading into this weekend, I feel that the opposite to be the case: bearish investors are already trumpeting the end of winter. If and when the models hint at cold air returning, it will be the bears that are seemingly blindsided and I would expect prices to abruptly reverse higher. Volatility will continue to be the name of the game. The January and February contracts could still see some additional downside if the forecast doesn’t cool but I feel that, especially for the Spring contracts, the magnitude of upside potential now outweighs the magnitude of downside risk at these levels.
It is for these reasons that, as the 2x ETFs BOIL and KOLD completed their bimonthly rollovers from the January to March contracts last week, on Thursday I sold short a 10% position in KOLD by placing a bullish bet on the March contract. I am targeting an upside target for the contract of $4/MMBTU. I prefer to short KOLD rather than buy BOIL as the former avoids leverage-induced losses over the long-term (at the risk of unlimited losses for any short position)
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