US natural gas futures dropped more than 6% to a two-month low on Monday, weighed down by forecasts for warmer-than-usual weather that could result in lower heating demand over the next two weeks amid a steady rise in production.

Front-month gas futures for January delivery fell 16.9 cents, or 6.6%, to settle at $2.406 per million British thermal units. The contract touched its lowest since Oct. 2 at $2.381 earlier in the session.

"The weather outlook for the rest of December is forecasted to be above normal and there is very little buy-side interest in the market," said Robert DiDona of Energy Ventures Analysis, adding "the other major bearish market driver is total net supply."

"When you combine the warmer than normal weather outlook for the rest of December, resilient production estimates and elevated storage levels you find little room for upside for the next two weeks which results in little to no bid-side interest from market participant."

Data provider Refinitiv estimated 321 heating degree days (HDDs) over the next two weeks in the Lower 48 US states, well below the 30-year average of 422. HDDs measure the number of degrees a day's average temperature is below 65 degrees Fahrenheit (18 degrees Celsius). The measure is used to estimate demand to heat homes and businesses.

Refinitiv said output in the Lower 48 averaged 90.9 billion cubic feet per day (bcfd) so far in December. That compares with a seven-month high of 91.0 bcfd in November 2020.

"In the absence of some bullish weather forecasts, this market may need to price in some further expansion in the supply surplus that has stretched considerably in recent weeks." advisory firm Ritterbusch and Associates said in a note.

Despite mild December forecasts, Refinitiv predicted demand, including exports, would rise to an average of 117.8 billion cubic feet per day (bcfd) this week from 113.4 bcfd in the prior week.

The amount of gas flowing to US LNG export plants, meanwhile, rose to an average of 10.4 bcfd so far in December, which would top November's 9.8-bcfd record.