Natural gas extends gains as colder weather forecasts boost demand

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Natural gas gains ahead of EIA

Colder temperatures and lower production support prices

The main fundamental factor behind the rise in U.S. natural gas prices has been a shift in short-term weather forecasts. After an unusually warm start to November, weather models began to indicate lower temperatures across the central and eastern United States in the second half of the month, which increases expected demand for heating.

According to LSEG estimates, total gas demand across the 48 contiguous U.S. states, including exports, could increase from 114.1 billion cubic feet per day this week to 124.2 billion next week. Lower production also provides additional support for prices: average daily output in November is estimated at approximately 112.3 billion cubic feet, compared with 113.4 billion in October and a record 115 billion in August.

However, the EIA forecast released on November 10 remains considerably more cautious. The agency expects the number of heating degree days in November to be 13% below the 10-year average, while residential and commercial gas consumption for the entire heating season is projected to decline by 3.8% compared with the previous winter. Thus, the current rally is largely based on a short-term reassessment of weather expectations rather than a confirmed long-term supply deficit.

LNG exports remain strong amid European supply concerns

In addition, strong demand from liquefied natural gas producers provides support. According to LSEG, average gas flows to the nine largest U.S. LNG export terminals reached approximately 19.1 billion cubic feet per day in November, compared with 18.4 billion in October, surpassing the previous monthly record of 18.8 billion set in April.

The increase in export capacity utilization is linked to the resumption of operations at Cove Point LNG following scheduled maintenance, higher deliveries to Golden Pass LNG, and the expansion of production capacity at Corpus Christi Stage 3. Meanwhile, conditions in the European gas market remain tense: prices at the Dutch TTF hub have risen above €85 per MWh amid faster withdrawals from storage facilities, disruptions to LNG supplies from the Middle East, and restrictions on Norwegian production.

This supports the attractiveness of U.S. exports, although further growth is limited by available terminal capacity. Another factor behind the rise in futures prices has been short covering by speculators, who had previously increased their aggregate net short position to its highest level since March 2020.

EIA storage report could test bullish momentum

Market participants remain focused on the EIA natural gas storage report, which has been postponed to November 13 this week due to Veterans Day. According to the latest report, inventories increased by 77 billion cubic feet in the week ended October 30, reaching 3.801 trillion cubic feet.

Ahead of this release, NATGAS may maintain positive momentum, although a major rally appears unlikely. Pullbacks toward $3.50–3.45 may offer buying opportunities, while a break below the latter level, as noted in Natural gas targets $3.90 as colder weather and LNG demand fuel the rally, would lead to a decline toward $3.40–3.30.

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