Natural Gas Futures Gain Ground as Winter Weather Outlook Shifts Colder

November NYMEX natural gas (NGX25) rebounded on Monday with a +4.18% climb, reversing most of the downside pressure from late last week. The price strength was driven by a meaningful shift in weather expectations, with meteorological forecasts turning decidedly cooler across the central and eastern United States heading into early November. This cooling pattern signals increased heating demand across northern regions—a traditional support factor for natural gas consumption.

Weather-Driven Demand Tailwinds

According to Atmospheric G2, the temperature outlook shifted cooler for much of the central and eastern US through November 1-5, with further cooling expected in eastern areas through November 6-10. This forecast adjustment is particularly relevant as the heating season approaches, typically underpinning stronger natural gas demand for residential and commercial space heating applications.

Meanwhile, electricity generation has also contributed to the supportive backdrop. The Edison Electric Institute reported that US electricity output for the week ended October 18 increased 4.0% year-over-year to 73,756 gigawatt hours. Over the trailing 52-week period, US electricity generation rose 2.89% year-over-year to 4,280,821 gigawatt hours, suggesting robust power demand that can translate into natural gas-fired generation needs.

Supply Dynamics Present Mixed Picture

Current US natural gas supply remains ample. According to Bloomberg NEF (BNEF) data for Monday:

• Lower-48 dry gas production: 108.2 bcf/day, up 4.2% year-over-year
• Lower-48 demand: 75.1 bcf/day, also up 4.2% year-over-year
• LNG export flows: Net flows to US terminals reached 16.6 bcf/day, reflecting a modest 1.5% week-over-week increase

The EIA raised its 2025 natural gas production forecast in early October by 0.5% to 107.14 bcf/day, up from the previous estimate of 106.60 bcf/day. Production levels remain near historical highs, with active US natural gas drilling rigs recently hitting 2-year peaks—a factor that typically weighs on price strength given the bearish implications of rising supply.

Inventory Levels Signal Adequate Supplies

Last week’s EIA inventory report presented mixed signals for price direction. Natural gas inventories for the week ended October 17 increased by 87 bcf, exceeding consensus expectations of 83 bcf and the 5-year weekly average of 77 bcf. As of October 17, total natural gas inventories stood 0.6% above year-ago levels and 4.5% above their 5-year seasonal average, indicating supplies remain well-positioned heading into the colder months.

International storage conditions present a different narrative. European gas storage reached 83% capacity as of October 21, running below the 5-year average of 92% for this period—a distinction worth monitoring for global natural gas dynamics.

Drilling Activity Reflects Market Confidence

Baker Hughes reported that active US natural gas drilling rigs remained steady at 121 in the week ending October 24, marginally below the 2.25-year high of 124 rigs set August 1. Year-over-year, gas drilling activity has expanded notably from September 2024’s 4.5-year low of 94 rigs, demonstrating increased industry confidence in natural gas fundamentals despite current pricing conditions.

Market Outlook

The natural gas complex faces competing narratives: cooler weather forecasts and rising electricity demand support price momentum, while robust production growth and elevated inventory levels provide a near-term ceiling on rallies. The weekly storage report will remain a critical indicator as the market navigates supply adequacy concerns heading into the traditional heating season.