U.S. natural gas futures on the New York Mercantile Exchange closed higher on Wednesday after an early pullback. The November contract, NGX26, settled up 0.015, or 0.50%, as markets regained confidence that upcoming U.S. storage data would show a smaller-than-average weekly build.
Traders cited expectations ahead of Thursday’s EIA release for inventories to rise by about 63 billion cubic feet (bcf) for the week ending September 25—below the 5-year average of 80 bcf—helping prices reverse course following weather-driven demand concerns.
Key takeaways
- Price move: November natural gas futures (NGX26) rose 0.50% to end the session higher after early losses.
- Catalyst: The market focused on expectations for a smaller-than-average increase in weekly U.S. EIA gas inventories.
- Demand signals: Initial weakness reflected forecasts that seasonal weather would remain normal in parts of the eastern and southern U.S.
- Supply and outlook: Multiple data points—production, demand, LNG flows, and rig activity—were mixed, underscoring a still-supplied market.
- Implication: Near-term price direction may hinge on whether future storage builds continue to track below the seasonal norm.
What drove the move
Natural gas prices initially slid on Wednesday as seasonal weather projections suggested demand for heating and cooling could be constrained. According to the Commodity Weather Group, normal seasonal weather is expected across the eastern and southern U.S. from October 5 to 14, limiting the risk of unusually strong temperature-driven gas consumption.
That pressure eased later in the session as attention shifted to expectations for the next weekly storage report. The consensus heading into Thursday’s EIA release is for U.S. natural gas inventories to increase by 63 bcf for the week ending September 25, which would be below the 5-year average build of 80 bcf. A smaller-than-average build typically supports prices by implying tighter balance between supply and demand.
Underlying fundamentals were also mixed. Data cited from BNEF showed lower-48 dry gas production at 110.4 bcf/day on Wednesday, up 1.3% year-over-year, while lower-48 demand was 71.6 bcf/day, up 0.6% year-over-year. Estimated LNG net flows to U.S. export terminals were 18.7 bcf/day, down 0.5% week-over-week, pointing to slightly less LNG-linked pull than the prior week.
Market reaction and the signals traders are weighing
Beyond Wednesday’s weather discussion and storage expectations, traders appeared to be balancing near-term catalysts against several factors described as medium-term headwinds.
One bearish element referenced in the coverage is market anticipation of a “Super El Niño” pattern that could bring warmer-than-normal temperatures to the Northern Hemisphere during fall and winter. Warmer weather generally reduces heating demand, which can weigh on natural gas prices during peak consumption months.
Power demand data offered additional nuance. The Edison Electric Institute reported that U.S. electricity output in the week ended September 26 fell 0.85% year-over-year to 83,811 gigawatt hours. However, output over the 52 weeks ending September 26 rose 3.27% year-over-year to 4,411,446 gigawatt hours, suggesting that while the most recent week was softer, the broader trend remained higher than a year earlier.
Supply outlook concerns also lingered. The EIA had projected on August 11 that U.S. natural gas storage could reach 3,985 bcf at the end of October—its highest level in 10 years and about 5% above the five-year average—implying ample inventory for the season.
Recent storage, infrastructure, and production indicators
The latest inventory trend cited in the report was not tight enough to remove all balance-of-supply concerns. In last Thursday’s weekly EIA update, inventories increased by 53 bcf for the week ended September 18, above expectations of 51 bcf but below the 5-year weekly average of 76 bcf. As of September 18, inventories were down 4.5% year-over-year and 2.9% above the five-year seasonal average, signaling adequate—though not extreme—storage levels.
Regional conditions in Europe added to the picture of a less constrained supply environment. The report noted that as of September 27, European gas storage was 71% full versus a 5-year seasonal average of 87% full, a gap that can influence international flows and pricing sentiment.
On the supply side, Baker Hughes said the number of active U.S. natural gas drilling rigs rose by 1 in the week ended September 25 to a new 3-year high of 135 rigs. More drilling activity can support future production growth, reinforcing the importance of demand strength and storage trajectories.
Bigger picture
With natural gas still reacting to the interplay between weather expectations and storage expectations, investors are likely to watch Thursday’s EIA data closely for confirmation that the weekly build remains below seasonal averages. If inventories rise more than expected, Wednesday’s rebound could fade quickly. If the build comes in near the lower end of expectations, the market may continue to price a tighter near-term balance despite already elevated supply benchmarks referenced in the EIA outlook.
Next for the market is the EIA weekly inventories report on Thursday, followed by the ongoing flow of weather forecasts and signals on U.S. production growth, LNG export demand, and rig activity that could shape the path for prices into the winter heating season.
