Natural gas slips below $3.10 as warm weather offsets supply risks

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Gas prices weaken despite supply disruptions

Mild forecasts weaken heating demand prospects

The main factor putting pressure on prices is the forecast of warm weather across most of the U.S. through early November, particularly in the northern and eastern states, which reduces expected gas consumption for heating. Meanwhile, U.S. Henry Hub futures are showing even more pronounced weakness, falling to approximately $2.51–2.53/MMBtu on October 26, although prices for the instrument shown remain higher due to differences in contract specifications and pricing.

The latest EIA report, released on October 22, showed an increase of 77 Bcf in U.S. natural gas inventories for the week ending October 16, bringing total stocks to 3.644 Tcf. This is 152 Bcf, or 4%, below last year's level, but 35 Bcf, or 1%, above the five-year average. At the same time, the weekly injection was below the historical norm of approximately 87 Bcf, indicating a gradual reduction in excess supply relative to seasonal benchmarks.

At the same time, inventories in the South Central region are 10% below last year's level and approximately 3.4% below the five-year average, while the situation in the East and Midwest appears more comfortable. Thus, overall inventory levels do not yet indicate a shortage, although the market is entering the heating season with a smaller reserve than last year. The next EIA report will be released on October 29 and will help assess the extent to which warm weather continues to support gas injections into storage facilities.

Middle East disruptions deepen regional price divergence

The situation in the Middle East remains one of the most significant potential sources of support for the U.S. natural gas market, despite the current weakness in prices. Disruptions to shipping through the Strait of Hormuz are restricting LNG exports from Qatar and the UAE, intensifying competition between European and Asian buyers for available supplies. Against this backdrop, European TTF prices rose to approximately €97.50/MWh on October 26, their highest level since late 2022, while European gas storage levels declined to approximately 74.6%.

The resulting divergence between European and U.S. prices reflects differences in regional supply-demand balances: the U.S. has substantial inventories and high production, while European consumers are more dependent on LNG imports. Prolonged restrictions on supplies through the Strait of Hormuz could support high utilization rates at U.S. export facilities, but the impact on Henry Hub will depend on the technical capacity to further increase exports.

NATGAS faces further downside risk below key support

In the coming weeks, Natural Gas price dynamics will be determined by a combination of weather forecasts, storage injection rates, and the resilience of export demand. The loss of support around $3.10, as I already warned in the article Natural gas faces deeper losses as warm weather weakens demand, significantly worsens the near-term outlook for NATGAS, but further declines could still be limited by the $3.10–2.90 support zone.

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