Storage Surplus and Weather Outlook Pressure Prices

U.S. natural gas prices retreated to a two-week low on Friday, sliding 4% to $3.10 per million British thermal units (MMBtu), as traders reacted to higher-than-expected storage builds and milder weather projections for the coming weeks. The latest decline snapped a two-week rally and underscored the market’s sensitivity to shifts in temperature and supply expectations.

The U.S. Energy Information Administration (EIA) reported an 80 billion cubic feet (bcf) increase in gas inventories for the week ending October 3, slightly exceeding analyst forecasts of 77 bcf and last year’s comparable build of 78 bcf. Storage levels now stand roughly 4% above the five-year seasonal average — a buffer that has softened price volatility in recent sessions.

Market sentiment was further dampened by updated weather forecasts pointing to warmer-than-normal conditions across much of the U.S., reducing both heating and cooling demand through late October. Traders and utilities anticipate slower withdrawals from storage as a result, allowing inventories to remain comfortably above average heading into the winter heating season.

Production Trends and Export Demand Shape Market Balance

While domestic production remains robust, signs of moderation have begun to emerge. Average gas output from the Lower 48 states has eased to 106.4 billion cubic feet per day (bcfd) so far in October, down from 107.4 bcfd in September. The decline reflects both scheduled maintenance and marginal curtailments in key shale regions, though overall supply remains historically strong.

Meanwhile, U.S. liquefied natural gas (LNG) exports continue to play a stabilizing role in the market. Flows to LNG terminals averaged 16.1 bcfd in early October, up from 15.7 bcfd in September and hovering near record highs. With European inventories nearing capacity and Asian demand poised to rise into winter, U.S. exporters are expected to sustain high utilization levels through year-end.

This export strength has helped underpin prices over the medium term, even as domestic fundamentals turn softer. Over the past month, natural gas has gained 5.6%, and compared to a year ago, prices remain up nearly 18%.

Market Sentiment: Balancing Short-Term Weakness and Long-Term Potential

Investor sentiment toward natural gas remains mixed — balancing short-term oversupply with longer-term optimism tied to structural LNG demand growth. Analysts note that while storage surpluses and mild weather could keep near-term prices under pressure, the broader supply-demand outlook remains constructive heading into 2026.

Historically, natural gas reached an all-time high of $15.78/MMBtu in December 2005, underscoring its cyclical volatility. With output levels near record highs and exports resilient, the next major catalyst for price direction will likely come from winter temperature trends and global LNG contract dynamics.

Looking forward, traders will closely monitor EIA storage updates and shifts in production activity, particularly in the Marcellus and Permian basins. A colder-than-expected November could swiftly tighten the market, while continued mild weather may prolong the current correction phase.