Natural gas futures recorded modest gains toward the end of the trading week after the US government reported a slightly larger-than-expected domestic supply withdrawal. With warmer temperatures cutting the year-to-date rally in half, will natural gas become bearish next year?

January natural gas futures rose $0.023, o 0.6%, to $3.838 per million British thermal units (btu). Natural gas is on track for a weekly loss of 7.3%, paring its year-to-date surge to below 50%.

According to the US Energy Information Administration (EIA), domestic inventories of natural gas declined 59 billion cubic feet in the week ending December 3, higher than the median estimate of a 59 billion cubic feet drawdown.

In total, US supplies stand at 3.505 trillion cubic feet, down 356 billion cubic feet from the same time a year ago. They are also 90 billion cubic feet below the five-year average of 3.595 trillion cubic feet.

Natural gas prices have been decimated over the last month, driven primarily on weather factors. Across the United States and Europe, it has been warmer than normal for this time of the year, impacting heating demand levels.

Although it was cooler in the eastern seaboard of the US this week, it was warmer than usual throughout the rest of the country. And the latest weather models suggest that weak physical demand will likely be the norm for the rest of the month as temperatures remain higher than the average.

“There will continue to be chilly weather systems into the West the next 15 days that at times will eject across the Midwest for locally stronger demand,” NatGasWeather noted. “But with much warmer than normal conditions over the important southern and eastern U.S., national demand just won’t be as strong as needed. We continue to expect better opportunities for colder systems into the northern and eastern U.S. during the last week of December and first week of January.”

In other energy commodities on Thursday, January West Texas Intermediate (WTI) crude oil futures tumbled $0.65, or 0.9%, to $71.71 per barrel. February Brent crude futures fell $0.58, or 0.76%, to $75.24 a barrel. January gasoline futures edged up $0.0072, or 0.34%, to $2.1557 per gallon. January heating oil futures jumped $0.0082, or 0.36%, to $2.2695 a gallon.