Nat-Gas Prices Rise as US Weather Forecasts Turn Colder

November Nymex natural gas prices advanced for a third consecutive session, reaching a 1.5-week high, primarily due to updated forecasts predicting colder US weather across central and eastern regions, which is expected to significantly increase heating demand. This upward movement occurred despite near-record US dry gas production and overall adequate inventories, though a recent EIA report showing a smaller-than-anticipated inventory build provided additional market support.

Analysis

November Nymex natural gas prices advanced for a third consecutive session, closing up +2.27% and reaching a 1.5-week high. This upward momentum is primarily driven by updated forecasts from Atmospheric G2 predicting colder US weather across the central and eastern regions from October 26 to November 4, which is expected to significantly boost heating demand.

Despite this price increase, US dry gas production remains robust at 104.6 bcf/day (+1.1% y/y), near record highs, with the EIA raising its 2025 production forecast to 107.14 bcf/day. Active US nat-gas drilling rigs also increased by +1 to 121, nearing a 2-year high, indicating continued supply growth potential. However, the recent EIA inventory build of +80 bcf was below both market consensus (+81 bcf) and the 5-year average (+83 bcf), providing some price support.

US state gas demand registered a strong +4.9% y/y increase to 71.5 bcf/day, complemented by a +5.1% y/y rise in US electricity output for the week ended October 11. While LNG net flows to export terminals saw a slight weekly decline of -1.7%, pipeline exports to Mexico hit a record 7.5 bcf/day in May. Overall US inventories, at +4.3% above their 5-year seasonal average, still signal adequate supplies, though European storage is below its 5-year average.

The market is currently balancing immediate demand-side catalysts from colder weather forecasts against a backdrop of strong domestic production and generally adequate inventory levels. The mixed signals, including a smaller-than-expected inventory build contrasting with high production and rising rig counts, suggest a dynamic market sensitive to short-term weather shifts.

Key Decisions for Investors

• Investors should closely monitor evolving weather forecasts for the central and eastern US, as sustained colder temperatures are the primary short-term catalyst for natural gas prices.
• Evaluate the long-term impact of near-record US dry gas production and increasing rig counts, which could cap significant upside despite short-term demand spikes.
• Consider potential for increased volatility given the mixed signals of a smaller-than-expected inventory build against overall adequate supply levels and below-average European storage.