Did a Larger-than-Expected Storage Build Weigh on Sentiment?
Thursday’s EIA report showed natural gas inventories rose by 87 Bcf for the week ending October 17, exceeding expectations of an 83 Bcf build and the five-year average of 77 Bcf. This marks a clear signal that supply remains more than adequate as the heating season approaches. Current stockpiles are now 0.6% above last year’s levels and 4.5% higher than the five-year seasonal average.
This supply buffer, paired with muted early winter demand, is limiting bullish conviction. Traders may remain cautious unless colder weather forecasts translate into material demand increases.
Is Production Growth Outpacing Demand?
Production continues to trend near record highs. Lower-48 dry gas output hit 107.9 Bcf/day on Thursday, up 5.4% year-over-year, according to BNEF. The EIA recently raised its 2025 production forecast by 0.5% to 107.14 Bcf/day, underscoring the strength of upstream activity.
In tandem, U.S. gas-directed rig counts are hovering near a two-year high. Baker Hughes reported 121 active gas rigs last week—up from the 4.5-year low of 94 in September 2024. While LNG exports and pipeline flows to Mexico remain strong, these are not enough to absorb the ongoing surge in output.
Can Weather-Driven Demand Offer Support?
Weather forecasts remain mixed. Atmospheric G2 noted a shift to cooler conditions in the South and East from October 28 to November 1, with warmer anomalies elsewhere. The November 2–6 period shows a similar split—cooler in the East, warmer in the West—offering limited clarity on near-term demand trends.
On the power side, electricity demand provides a modest tailwind. The Edison Electric Institute reported a 4.0% year-over-year increase in lower-48 output for the week ending October 18. However, this alone is unlikely to drive a sustained rally without stronger weather-driven consumption.
