Weather Shift Drives Natural Gas Rally, December Contract Surges

Cold Front Fuels Gas Market Momentum

Natural gas futures rebounded sharply Friday as meteorological forecasts pointed to significantly colder conditions settling across the US. The December Nymex contract climbed +2.48%, marking a one-week peak as investors repositioned for seasonal heating demand. Atmospheric G2’s outlook flagged temperature declines across western, northeastern, and central regions through early December—precisely the window when residential heating needs typically surge.

The price action wasn’t solely weather-driven. Thursday’s EIA inventory report provided substantial support, showing natural gas storage fell 14 bcf for the week ending November 14, outpacing market expectations of a 12 bcf decline and significantly exceeding the five-year seasonal average draw of +12 bcf. This tighter inventory picture underpinned Friday’s advance, particularly as traders positioned for winter demand dynamics.

Production Growth Threatens Price Ceiling

Despite the bullish near-term backdrop, underlying supply remains robust. The EIA recently raised its 2025 production forecast by 1% to 107.67 bcf/day, up from September’s 106.60 bcf/day estimate. Lower-48 dry production measured 111.1 bcf/day on Friday—a 7.9% year-over-year jump—while active drilling rigs hit a 2.25-year high of 128 units just two weeks ago. The November 21 count showed 127 rigs in operation, indicating producers remain committed to expanding supply even amid this price recovery.

Demand Picture Presents Mixed Signals

Lower-48 gas demand contracted to 82.8 bcf/day, down 9.2% year-over-year, according to BNEF data. LNG export flows hit 17.7 bcf/day, down slightly week-over-week. Yet broader electricity demand offers a counterbalance: the Edison Electric Institute reported US power output rose 5.33% year-over-year for the week ending November 15, reaching 75,586 GWh, with the 52-week period up 2.9% to 4,286,124 GWh.

Inventory Status and Storage Considerations

As of mid-November, natural gas inventories held 0.6% below year-ago levels but remained 3.8% above the five-year seasonal average, signaling adequate supplies entering winter. European storage presented a tighter picture at 81% capacity versus the 90% five-year seasonal norm, potentially creating divergent regional pricing dynamics. Producers and market participants across regions including gas prices in New Jersey and other northeastern markets are monitoring these inventory transitions closely.

The convergence of weather forecasts, production trends, and storage levels will likely define near-term trading dynamics as December approaches.