US Natural Gas Market Under Pressure: Record Output Weighs Against Moderate Demand Growth

US natural gas prices faced downward momentum on Monday, with December Nymex futures closing 0.68% lower at NGZ25 contract levels. The decline reflects a confluence of bearish factors, particularly surging production levels that have reached unprecedented heights, while seasonal weather patterns show mixed signals across different regions.

The Supply Surge Reshaping the Natural Gas Formula

The primary pressure on prices stems from record-breaking production figures. According to Bloomberg NEF data, lower-48 natural gas output surged to 112.2 bcf/day on Monday, representing an 8.3% year-over-year increase and marking a historic peak. This production momentum is not temporary—the EIA upgraded its 2025 forecast for US natural gas production to 107.67 bcf/day in mid-November, a 1.0% increase from September’s estimate of 106.60 bcf/day.

The drilling activity further underscores bullish production expectations. Baker Hughes reported 127 active natural gas rigs in the week ending November 21, just shy of the 2.25-year high of 128 rigs recorded on November 7. This represents a dramatic recovery from September 2024’s 4.5-year low of 94 rigs, signaling sustained investment in production capacity.

Weather Forecasts Add Complexity to Demand Outlook

While supply accelerates, demand dynamics present a mixed picture. Atmospheric G2’s forecasts indicated cooler conditions across the eastern two-thirds of the US for the November 29-December 3 period, which could support heating demand. However, warmer forecasts for the Southeast and West dampened this support, creating an overall neutral weather backdrop.

Lower-48 dry gas demand on Monday registered 83.1 bcf/day, up 4.9% year-over-year. LNG export terminal flows reached 17.7 bcf/day, showing modest week-over-week growth of 0.2%. Meanwhile, US electricity generation rose 5.33% year-over-year for the week ending November 15, reaching 75,586 GWh, suggesting underlying energy consumption remains solid.

Inventory Levels Suggest Balanced Supply Dynamics

Weekly inventory data provided some support to natural gas prices. The EIA reported a 14 bcf decline for the week ended November 14, exceeding market consensus of 12 bcf and well above the 5-year weekly average gain of 12 bcf. However, absolute inventory levels remain adequate, standing 0.6% below year-ago levels but 3.8% above 5-year seasonal averages.

European storage presented a different picture, holding at 81% capacity against a 90% seasonal average for this period, indicating comparatively tighter supply conditions internationally. These divergent inventory signals reflect the complex natural gas formula currently governing global markets, where regional imbalances and production surges create pressure on pricing across different geographies.