Winter Demand Surge Pushes Natural Gas Prices to 3-Year High

Natural gas futures surged Wednesday, with January Nymex nat-gas (NGF26) closing up 3.20% as cold weather forecasts triggered significant fund inflows into the market. The rally pushed prices above the $5.00 per million British thermal units threshold, marking the highest nearest-futures level in nearly three years and igniting additional technical buying momentum.

Weather-Driven Demand Catalyst

The sharp price move was primarily driven by forecaster Atmospheric G2’s prediction of below-normal temperatures across the Northeast and Great Lakes regions through the end of this week, with another cold snap expected after mid-month. This weather pattern is expected to substantially increase heating demand across lower-48 states, supporting the nat-gas nat type rally. Wednesday’s demand data confirmed this trend, with Lower-48 state gas consumption reaching 113.1 bcf/day, representing a 2.6% year-over-year increase.

Supply-Demand Dynamics Remain Supportive

On the production side, Lower-48 dry gas output hit 112.0 bcf/day on Wednesday, up 6.4% year-over-year according to BNEF data. Despite the production gain, demand growth is outpacing supply expansion in the current cycle. LNG export flows moderated to 17.5 bcf/day, down 4.9% week-over-week, providing some relief to domestic availability concerns.

The broader electricity generation picture also supports nat-gas strength. The Edison Electric Institute reported that US electricity output for the week ended November 29 rose 2.11% year-over-year to 76,459 GWh, with the 52-week average climbing 2.99% to 4,289,746 GWh. Higher power generation typically correlates with increased nat-gas burn for electricity production.

Inventory Outlook Remains Critical

Market consensus expects Thursday’s EIA weekly inventory report to show a withdrawal of 18 bcf for the week ended November 28. Last week’s release proved bullish, with inventories declining 11 bcf—exceeding the consensus estimate of 9 bcf decline, though remaining below the 5-year average draw of 25 bcf. As of November 21, nat-gas inventories were 0.8% below year-ago levels but sitting 4.2% above their 5-year seasonal average, indicating balanced supply conditions.

European storage metrics paint a different picture, with gas storage at 75% capacity as of December 1, below the 85% five-year seasonal average for this period.

Production Rigs at Multi-Year Highs

Baker Hughes data showed active US nat-gas drilling rigs climbing 3 to reach 130 units in the week ending November 28—the highest level in 2.25 years. This marks a notable rebound from September 2024’s 4.5-year low of 94 rigs, signaling renewed industry confidence in nat-gas economics.

The EIA’s November projection raised 2025 nat-gas production forecasts by 1.0% to 107.67 bcf/day, up from September’s 106.60 bcf/day estimate. US production is currently operating near record highs, supported by the elevated rig count and operational efficiency improvements across the producing basin.