Natural Gas Prices Retreat as Weather Patterns Shift and Production Hits Record Heights

Natural gas futures took a step back Monday, with December Nymex contracts (NGZ25) declining 0.68% to close at a lower level. The pullback reflects a confluence of market-moving factors: forecasters predict a mixed pattern across US regions through early December, while domestic production continues to reach unprecedented levels.

Production Surge Pressures the Market

The primary headwind for prices came from the supply side. According to Bloomberg NEF data, Lower-48 dry gas output climbed to an all-time high of 112.2 bcf/day on Monday—representing an 8.3% year-over-year jump. This record production volume is a structural bearish force that continues to weigh on valuations.

The production outlook remains elevated even as forecasters project growth. The Energy Information Administration revised its 2025 forecast in November, raising expected US natural gas production by 1.0% to 107.67 bcf/day compared to September’s estimate of 106.60 bcf/day. Active drilling rigs have climbed to a 2-year high recently, signaling that producers remain committed to extraction despite current price levels.

Weather Forecast Symbols Mixed Signals from Both Coasts

Monday’s meteorological outlook proved inconclusive for demand drivers. Atmospheric G2’s forecast indicated colder conditions would dominate the eastern two-thirds of the nation between November 29 and December 3—a pattern that typically supports heating demand. However, the Southeast and Western regions face warmer-than-normal conditions, creating offsetting dynamics. The net effect: demand growth prospects remain unclear in the near term.

Gas demand data tells a nuanced story. Lower-48 consumption reached 83.1 bcf/day on Monday, up 4.9% year-over-year. Meanwhile, LNG export flows to US terminals averaged 17.7 bcf/day—essentially flat week-over-week—suggesting overseas demand remains steady without acceleration.

Storage and Electricity Provide Limited Support

On the bullish side, storage dynamics showed some tightness. The EIA’s weekly inventory report revealed draws of 14 bcf for the week ending November 14—exceeding market consensus of 12 bcf and well above the 5-year seasonal average of a 12 bcf build. As of mid-November, natural gas inventories were down 0.6% year-over-year but still 3.8% above their 5-year seasonal baseline, indicating adequate supplies despite seasonal drawdowns.

US electricity generation offered a secondary supportive signal. The Edison Electric Institute reported that Lower-48 power output for the week ended November 15 rose 5.33% annually to 75,586 GWh, while the 52-week rolling total climbed 2.9% to 4,286,124 GWh. Higher electricity demand can translate to increased gas burn at power plants, though this effect appears muted given overall price weakness.

The Broader Context: Ample Supply, Subdued Demand

In the European context, gas storage facilities reached 81% capacity as of mid-November, trailing the 5-year seasonal average of 90% for this period—a reminder that global supply tightness remains absent. Back home, Baker Hughes data showed active US natural gas rigs rose by 2 to 127 for the week ending November 21, hovering near the 2.25-year high of 128 rigs from early November. This represents significant growth from September 2024’s 4.5-year low of 94 rigs, underscoring the industry’s aggressive response to recent market conditions.

The upshot: Monday’s price retreat reflects fundamental supply abundance overwhelming modest demand growth and mixed seasonal signals. Until production decelerates materially or demand accelerates sharply, downside price pressure may persist.