Quick Summary
- December Nymex natural gas futures saw a slight increase, closing up 0.23% on Tuesday.
- Weather forecasts showing colder temperatures for parts of the US boosted expectations for heating demand.
- However, rising US natural gas production, near record highs, and increased rig activity present bearish price pressures.
- Recent EIA inventory data showed a larger-than-expected build, indicating ample supplies.
- European gas storage levels are notably below their five-year seasonal average.
Natural Gas Prices Edge Higher Amid Shifting Weather Forecasts
December Nymex natural gas futures (NGZ25) experienced a modest gain on Tuesday, closing up by 0.23%. This rebound occurred after the commodity touched a 1.5-week low earlier in the session.
Weather Patterns Influence Market Sentiment
The upward movement in natural gas prices was influenced by updated weather forecasts. Projections indicating colder temperatures across the central and eastern United States toward the end of the November 23-27 period suggest a potential increase in heating demand, a key driver for natural gas consumption. However, initial price declines on Tuesday were attributed to forecasts from Atmospheric G2 predicting warmer long-term temperatures for most of the US between November 28 and December 2.
Production Levels Remain a Key Factor
Elevated US natural gas production continues to exert downward pressure on prices. The Energy Information Administration (EIA) recently revised its 2025 US natural gas production forecast upward by 1.0% to 107.67 billion cubic feet per day (bcf/day), an increase from the September estimate of 106.60 bcf/day. Current US natural gas production is hovering near record highs, supported by a recent two-year high in active US natural gas rigs.
Current Market Data and Trends
US (lower-48) dry gas production recently stood at 108.7 bcf/day, representing a year-over-year increase of 5.8%, according to BNEF. Lower-48 state gas demand was recorded at 87.3 bcf/day, a 14.1% increase year-over-year. Estimated LNG net flows to US LNG export terminals showed a slight decrease of 4.6% week-over-week, totaling 17.1 bcf/day on Tuesday.
💡 As a supportive factor for gas prices, the Edison Electric Institute reported that US (lower-48) electricity output in the week ended November 8 rose by 0.12% year-over-year to 73,383 GWh. Over a 52-week period ending November 8, US electricity output increased by 2.84% year-over-year, reaching 4,282,302 GWh.
Inventory Levels and Storage Dynamics
Last Friday’s weekly EIA report indicated a bearish trend for natural gas prices. Natural gas inventories increased by 45 bcf for the week ended November 7, surpassing the market consensus of 34 bcf and the five-year weekly average of 35 bcf. As of November 7, natural gas inventories were down 0.3% year-over-year but remained 4.5% above their five-year seasonal average, suggesting ample supply conditions.
📌 In contrast, gas storage in Europe reached 82% capacity as of November 12, which is notably below the five-year seasonal average of 91% for this time of year.
Rig Count Adjustments
Baker Hughes reported that the number of active US natural gas drilling rigs decreased by three to 125 for the week ending November 14. This pullback followed a two-and-a-half-year high of 128 rigs recorded on November 7. Over the past year, the number of active gas rigs has seen an upward trend.
Expert Summary
December natural gas futures settled fractionally higher, buoyed by colder weather expectations. Despite this, persistent high production levels and a recent build in inventories create a mixed outlook. Market participants will keenly watch future weather patterns and production data for further price direction.
