Nat-Gas Prices Erase Early Gains as US Weather Forecasts Warm

November Nymex natural gas (NGX25) on Wednesday closed down by -0.024 (-0.69%).

Nov nat-gas prices fell from a 3-week nearest-futures high on Wednesday and settled lower.  Updated US weather forecasts on Wednesday, which called for warmer temperatures early next month, spurred long liquidation in nat-gas futures.  Forecaster Atmospheric G2 said on Wednesday that forecasts have shifted warmer across the US for November 1-5, which should curb heating demand for nat-gas.  

Nat-gas prices were also pressured on Wednesday by the outlook for a higher-than-seasonal build in nat-gas storage.  The consensus is that Thursday's weekly EIA nat-gas inventories will increase by +83 bcf for the week ended October 17, above the five-year average for this time of year of +77 bcf.

US (lower-48) dry gas production on Wednesday was 107.1  bcf/day (+3.9% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 73.8 bcf/day (+4.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 16.4 bcf/day (+0.2% w/w), according to BNEF.  According to a report on Monday from the EIA, US nat-gas pipeline exports to Mexico rose to a record 7.5 bcf/day in May.

Higher US nat-gas production is a bearish factor for prices.  On October 7, the EIA raised its forecast for 2025 US nat-gas production by +0.5% to 107.14 bcf/day from September's estimate of 106.60 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

As a supportive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended October 18 rose +4.0% y/y to 73,756 GWh (gigawatt hours), and US electricity output in the 52-week period ending October 18 rose +2.89% y/y to 4,280,821 GWh.

Last Thursday's weekly EIA report was supportive for nat-gas prices since nat-gas inventories for the week ended October 10 rose +80 bcf, below the market consensus of +81 bcf and below the 5-year weekly average of +83 bcf.  As of October 10, nat-gas inventories were up +0.4% y/y and were +4.3% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of October 19, gas storage in Europe was 83% full, compared to the 5-year seasonal average of 92% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending October 17 rose by +1 to 121 rigs, just below the 2-year high of 124 rigs posted on August 1.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.