Natural gas approaches $3.35 as lower U.S. output supports prices

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Natural gas bulls approach crucial resistance

EIA data and mild weather create conflicting signals

Additional support for prices comes from improving conditions in the U.S. natural gas market following the release of the latest EIA report. December Natural Gas futures on NYMEX approached $3.00/MMBtu today, reaching their highest levels in more than a week. At the same time, forecasts of warm weather across much of the U.S. through November 20 are limiting buying interest, as heating demand has yet to show a sustained seasonal increase. Thus, the current recovery is primarily driven by changes in the supply and export balance, while domestic consumption does not yet provide sufficient support for a more prolonged advance.

LNG demand offsets domestic supply fluctuations

A significant factor in recent trading sessions has been the changing production balance in the U.S. natural gas market. According to preliminary LSEG data, average daily production in the Lower 48 states declined to approximately 111.2 Bcf in early November, compared with 113.4 Bcf in October. This trend could gradually restrict supply, although part of the decline is related to temporary production constraints and may be reversed once operations resume at certain fields.

Meanwhile, U.S. LNG terminals continue to account for a significant share of additional natural gas demand. Average gas deliveries to export facilities in early November are estimated at around 18.2 Bcf per day, compared with 18.4 Bcf in October, with some daily figures noticeably exceeding the monthly averages. Gas exports to Mexico and demand from the U.S. power sector are also important factors.

However, relatively mild weather conditions continue to offset these supportive factors. According to the latest weather forecasts, temperatures across much of the U.S. could remain above seasonal norms until the second half of November, limiting gas consumption for residential and commercial heating. Even relatively small changes in temperature forecasts could significantly affect prices as the winter season approaches.

If the forecast cold spell proves more prolonged, lower production and strong export demand could accelerate inventory withdrawals. Conversely, continued warm weather would extend the injection season and limit the potential for further recovery in Natural Gas prices. Therefore, the near-term market outlook will primarily depend on three factors: the stability of U.S. production, LNG terminal utilization, and the actual intensity of heating demand in the second half of November.

Break above $3.55 could shift the market outlook

At present, the recovery is limited by resistance around $3.35, where selling pressure may still intensify. However, a break above this level would lead to a rise toward $3.45–3.50, where renewed selling is also possible. Only a decisive break above resistance around $3.55, as stated in Natural gas struggles below $3.22 as EIA storage data approach, could weaken the bears' position and improve the near-term outlook for NATGAS.

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