Natural Gas Storage Draw Triggers Price Surge Amid Cold Weather Outlook

January Nymex natural gas futures gained momentum on Wednesday, closing +0.077 (+1.72%), propelled by a sharper-than-expected inventory decline. The EIA’s weekly report showed natural gas storage contracted by 11 bcf for the week ending November 21, exceeding market consensus of 9 bcf and reflecting tightening supply conditions.

Storage Data Supports Bullish Momentum

The larger drawdown in natural gas storage came at a critical time for seasonal demand. While the 11 bcf decline was substantial, it still trailed the 5-year weekly average of 25 bcf, suggesting storage levels remain relatively healthy. As of November 21, natural gas inventories stood 4.2% above their 5-year seasonal average, though year-over-year they declined 0.8%, indicating a moderately supportive backdrop for prices.

Across the Atlantic, European gas storage sat at 78% capacity as of November 24, below the 88% five-year seasonal norm for this period—a potential source of transatlantic demand competition.

Weather Forecasts Bolster Heating Demand Expectations

Colder weather patterns emerging across the US provided additional tailwinds for natural gas prices. Atmospheric G2 forecasters noted a shift toward colder conditions in the eastern and southern US (December 1-5) and the eastern and northern regions (December 6-10), potentially lifting heating fuel demand heading into the winter season.

Production Gains Weigh Against Price Gains

Despite the inventory support, robust US natural gas production remains a headwind. The EIA raised its 2025 production forecast to 107.67 bcf/day in November, up 1.0% from September’s 106.60 bcf/day estimate. Lower-48 dry gas production reached a record 113.1 bcf/day on Wednesday, representing an 8.3% year-over-year increase.

The supply picture reflects active drilling activity, with US natural gas drilling rigs climbing to 130 units in the week ending November 28—a 2.25-year high, according to Baker Hughes. The rig count has more than doubled from September 2024’s 94-rig low.

LNG Exports and Electricity Demand

LNG net flows to US export terminals averaged 18.4 bcf/day Wednesday, up 3.5% week-over-week. Meanwhile, US electricity generation remained supportive, with lower-48 gas demand reaching 89.8 bcf/day, though this marked a slight 0.7% year-over-year decline. Over a 52-week period ending November 15, US electricity output climbed 2.9% year-over-year to 4,286,124 GWh, according to the Edison Electric Institute.

Market Takeaway

The natural gas market faces competing dynamics: supportive storage draws and cold weather forecasts are being offset by record production levels and elevated rig counts. Near-term price momentum appears tied to seasonal demand patterns and weather volatility, with longer-term trends dependent on whether elevated production levels persist and how export demand evolves.