Key Takeaways
- December natural gas futures (NGZ25) saw a significant surge, closing up 5.23% due to colder weather forecasts boosting demand.
- While cold weather is a bullish signal, increased US natural gas production and high rig counts present bearish pressures.
- Recent inventory reports showed a moderate increase in natural gas stocks, keeping them at adequate levels but slightly above the 5-year average.
- Global natural gas storage, particularly in Europe, remains below seasonal averages, which could offer some support to prices.
Natural Gas Prices Rally on Cold Weather Outlook
December Nymex natural gas futures (NGZ25) experienced a substantial increase on Tuesday, closing at +0.227, or 5.23%. This upward movement pushed near-month futures to an 8-month high.
The rally is largely attributed to updated weather forecasts predicting frigid temperatures across the United States. Forecaster Vaisala indicated that the Global Forecast System model shifted to a colder outlook for the North Rockies and Northeast regions between November 14-18. Additionally, colder projections were noted for the central U.S. from November 21-25. These shifts are expected to drive increased demand for natural gas for heating purposes.
Production and Inventory Dynamics
Despite the bullish impact of colder weather, higher U.S. natural gas production continues to exert downward pressure on prices. The Energy Information Administration (EIA) revised its 2025 U.S. natural gas production forecast upwards by 0.5% to 107.14 billion cubic feet per day (bcf/day), an increase from September’s estimate of 106.60 bcf/day. Current U.S. natural gas production is nearing record levels, supported by a recent 2-year high in active drilling rigs.
On Tuesday, U.S. lower-48 dry gas production stood at 110.7 bcf/day, marking an 11.7% year-over-year increase, according to BNEF. Lower-48 state gas demand reached 92.6 bcf/day, up 20.1% year-over-year. Estimated LNG net flows to U.S. export terminals were reported at 18.1 bcf/day, a 4.1% increase week-over-week.
💡 Supportive data for gas prices comes from the Edison Electric Institute, which reported that U.S. lower-48 electricity output for the week ending November 1 rose by 0.05% year-over-year to 73,730 GWh. Over the preceding 52 weeks, U.S. electricity output increased by 2.89% year-over-year, reaching 4,282,216 GWh.
Inventory Levels and Global Context
Last Thursday’s EIA report indicated that natural gas inventories for the week ending October 31 increased by 33 bcf. This figure met market consensus but was lower than the 5-year weekly average of +42 bcf. As of October 31, total natural gas inventories were up 0.4% year-over-year and exceeded the 5-year seasonal average by 4.3%, suggesting ample supply levels.
In a global context, gas storage levels in Europe stood at 83% full as of November 9. This is notably below the 5-year seasonal average of 92% for the same period, potentially offering some underlying support to international gas prices.
Rig Count Trends
Baker Hughes reported on Friday that the number of active U.S. natural gas drilling rigs increased by 3 to 128 rigs in the week ending November 7. This marks a 2.25-year high. Over the past year, the gas rig count has climbed significantly from a 4.5-year low of 94 rigs reported in September 2024.
Expert Summary
December natural gas futures surged to an 8-month high, primarily driven by colder weather forecasts and increased heating demand expectations. While strong production and a high rig count present headwinds, current inventory levels and global storage deficits could provide a measure of price support.
