Natural Gas News: Colder Weather Spurs Rally in Futures; Traders Eye EIA Data

Colder Weather Pushes Futures Higher

U.S. natural gas futures climbed for a second consecutive session on Thursday, supported by forecasts of increased heating demand as colder temperatures approach. December Nymex natural gas futures broke above a key retracement zone at $3.168 to $3.044, which now acts as support, and surpassed the 200-day moving average at $3.335. Traders are now targeting the October 4 high of $3.573.

Maxar Technologies forecasts a significant temperature drop between November 28 and December 2, which is expected to drive heating demand. U.S. natural gas consumption has already risen, with the lower-48 demand reported at 77.6 Bcf/day, a 1% year-over-year increase, according to BloombergNEF. Electricity output also grew by 3.19% for the week ending November 9, as reported by the Edison Electric Institute, bolstering natural gas use in utilities.

Production Cuts Tighten Supply Despite Elevated Storage

U.S. dry gas production has softened, falling to 101.1 Bcf/day—a 4.1% decline year-over-year. Active drilling rigs fell to 101 last week, according to Baker Hughes, near multi-year lows.

Meanwhile, the latest EIA report revealed a storage build of 42 Bcf for the week ending November 8, surpassing the five-year average of 29 Bcf. U.S. inventories now sit 6.1% above the five-year average and 3.7% higher year-over-year.

For the upcoming EIA storage report, traders anticipate a build of 2 Bcf. However, an unexpected draw could sharply boost prices, amplifying market volatility as colder weather strengthens heating demand.

European storage levels remain robust at 93% capacity, slightly above historical averages. Despite high inventories, colder weather and reduced U.S. production may create tighter conditions heading into winter.

LNG Export Demand Fuels Longer-Term Outlook

Rising LNG export demand is reshaping the supply-demand balance. The EIA projects U.S. natural gas demand, including LNG and pipeline exports, to rise to 111.2 Bcf/day in 2024 and 113.0 Bcf/day in 2025. Most of this growth stems from a 14% jump in LNG exports, supported by new projects like Plaquemines in Louisiana and Cheniere Energy’s Corpus Christi expansion in Texas, both set to boost capacity by late 2024.

Producers like EQT, EOG Resources, and Expand Energy are cautiously planning output increases for 2025 as prices improve. Analysts expect Henry Hub prices to average $3.27/MMBtu in 2025, up from $2.29/MMBtu in 2024.

Market Forecast

The near-term outlook remains bullish, with colder weather driving higher heating demand and potentially leading to sharper price movements, especially if the EIA reports an unexpected storage draw. Elevated storage levels may limit gains temporarily, but the longer-term market shows tightening conditions driven by rising LNG demand and moderated production.