U.S. natural-gas futures for February delivery ended Wednesday at $4.172 per million British thermal units. That is down 57% from the summer highs notwithstanding a 4.6% gain on Wednesday that snapped a four-session losing streak, including an 11% drop on Tuesday. 

The price is now about the same as it was a year ago, when temperatures were also warmer than normal and before Russia’s invasion of Ukraine jolted energy markets.

The plunge is a bad omen for drillers, whose shares were among the stock market’s few winners last year. Cheaper gas is good news for households and manufacturers whose budgets have been busted and profit margins pinched by high fuel prices. Though shocks of cold and problems with pipelines could still push up regional prices, less expensive natural gas should help to cool inflation in the months ahead. 

There are also major geopolitical implications. Mild weather is driving gas prices lower in Europe, too, spelling relief for the region that coming into the winter faced the possibility of rolling blackouts and factory shutdowns. The war threw energy markets into chaos, but benchmark European natural-gas prices are now less than half of what they were a month ago and lower than any point since the February invasion. 

The drop is a welcome surprise for European governments that committed hundreds of billions of dollars to shield consumers and companies from high energy prices. Moscow cut supplies of gas to Europe last year in what European officials described as an attempt to undermine military and financial support for Kyiv.

So far, Russia’s strategy isn’t working. Warm weather is limiting demand, as is a European Union-led effort to curb consumption. But analysts say prices in Europe could shoot up again when the continent tries to refill stores for the 2023-24 winter without much Russian gas.

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Besides being burned to heat roughly half of American homes, natural gas is used for cooking, along with making electricity, plastic, fertilizer, steel and glass. Last year’s high prices were a big driver of the steepest inflation in four decades.

When prices peaked in August, the question was whether there would be enough gas to get through the winter, given record consumption by domestic power producers with few alternatives, as well as demand in Europe, where the race is on to replace Russian gas.

Now the question in the market is how low prices will go.  

They were already falling when the late-December storm brought snow to northern cities and stranded travelers. Frigid temperatures prompted a big draw from U.S. natural-gas stockpiles and froze wells in North Dakota and Oklahoma. At its peak, the storm took nearly 21% of U.S. gas supply offline, according to East Daley Analytics, a gas consulting firm.  

The demand surge and the supply disruptions were fleeting and failed to counteract forecasts for balmy January weather. Prices were also pushed lower by another delay in the restart of a Texas export facility. It has been offline since a June fire left a lot of gas in the domestic market that would have otherwise been shipped overseas. 

Temperatures above 60 degrees Fahrenheit are forecast this week around the Great Lakes and along the Ohio Valley, while highs in the Southeast might reach into the 80s.

As measured in heating-degree days, a population-weighted measure of temperatures below 65 degrees Fahrenheit, this week will be twice as warm relative to normal as the last week of December was cold, said Eli Rubin, senior energy analyst at the gas-trading firm EBW AnalyticsGroup.

The firm estimates that warmer weather over the first half of January will reduce gas demand by about 100 billion cubic feet over that stretch. That is about the volume of gas that the U.S. produces each day. The Energy Information Administration estimates that daily American output hit a record in 2022.

Analysts anticipate similarly strong production in 2023. They expect the year to pass without new LNG export capacity coming online for the first time since 2016, when the U.S. began to ship liquefied natural gas abroad from the Lower 48 States. 

“The market is moving from a mind-set of winter scarcity to looking ahead to exiting winter with more in storage, adding production and not adding any new LNG exports,” Mr. Rubin said. “If anything, the market looks oversupplied.” 

Analysts have been reducing their gas-price assumptions as well as their outlooks for producers as the first weeks of winter pass without sustained periods of cold weather. 

Gabriele Sorbara, an analyst at Siebert Williams Shank, told clients this week that he expected natural gas to average $4.25 in 2023, down from a forecast of $5.50 before the warm spell. As a result, he downgraded shares of

EQT Corp.

, the biggest U.S. producer and one of the top-performing stocks in the S&P 500 last year, from buy to hold. 

“EQT will be dead money until estimates recalibrate and there is visibility of a rebound in natural-gas prices,” he wrote in a note to clients.  

Hedge funds and other speculators have, on balance, been bearish on natural-gas prices since the summer, maintaining more wagers on falling prices than on gains, according to Commodity Futures Trading Commission data. Analysts said that is probably the safe bet. 

“We continue to caution against any attempts to time a price bottom,” the trading firm Ritterbusch & Associates told clients this week. 

—Joe Wallace contributed to this article.

Write to Ryan Dezember at ryan.dezember@wsj.com