Natural Gas News: Will Storage Levels and Mild Forecasts Keep Bulls at Bay?

Geopolitical Calm Eases Market Fears

At the start of last week, U.S. natural gas futures dropped sharply alongside a broader energy sector selloff. This decline partly stemmed from reduced geopolitical concerns as strikes in the Middle East targeted military rather than critical infrastructure. Israel’s focus on Iranian military sites rather than oil assets lowered the risk of supply disruptions from the region, including the crucial Strait of Hormuz. With the risk premium diminishing, the energy markets—including natural gas—turned bearish, as traders refocused on supply and demand fundamentals​​.

Last week, Natural Gas Futures settled at $2.663, down $0.451, or -14.48%.

Warm Weather Curtails Demand as Market Enters Winter

Warmer-than-average weather forecasts dominated natural gas market sentiment, with both U.S. and European models indicating lower heating degree days (HDDs) through early November. These mild conditions, especially across the South and East, have limited demand for natural gas, with temperatures ranging between 60°F and 80°F.

The U.S. experienced warmer weather across much of the country, reducing the need for heating, while cooler conditions in the West and Central U.S. were insufficient to offset the lower nationwide demand. NatGasWeather even revised down its HDD forecast by 11 degrees, further eroding demand expectations. This unseasonably warm weather contributed to continued selling pressure in the natural gas market​​.

Production Holds Steady While Storage Levels Rise

Steady production rates across the Lower 48 states also added to the bearish outlook. Daily output averaged around 102.8 Bcf, approaching summer peak levels, and adding to an already oversupplied market.

The U.S. Energy Information Administration (EIA) reported a storage injection of 78 Bcf for the week ending October 25, which pushed total gas storage to 3,863 Bcf. This figure is 107 Bcf above last year’s level and 178 Bcf above the five-year average, underscoring a comfortable supply cushion as the market enters the winter season. This continued supply surplus places downward pressure on prices, especially with moderate demand outlooks​​.

Cash Prices Continue to Slide as LNG Faces Delays

Natural gas cash prices also declined for a fourth consecutive week, with regions such as the East, California, and the Rockies leading the downward trend. NGI’s Weekly Spot Gas National Average fell to $1.330/MMBtu.

Delays at the Golden Pass LNG terminal impacted the natural gas market as well, preventing a boost in demand from liquefied natural gas (LNG) exports that might otherwise have absorbed excess U.S. supply. This weakness in cash prices reflects the overall bearish tone gripping the market amid ample domestic stockpiles and mild demand expectations​.

Bearish Forecast: Mild Weather and High Storage Keep Prices Down

Given the unseasonably mild weather forecast and storage levels well above seasonal averages, the outlook for U.S. natural gas remains bearish in the near term. Without a significant cold front to drive heating demand, prices may continue to face pressure.

Traders should keep an eye on EIA storage reports and weather model updates for any potential changes. However, unless there’s a marked shift in demand drivers, prices are likely to test support near $2.585 as the market heads deeper into the season under the weight of oversupply​​.