Natural Gas News: Technical Weakness and Inventory Report Fuel Selloff

Natural Gas Tumbles Below Key Support as Storage and Weather Weigh Heavily

U.S. natural gas futures saw a steep decline Friday, triggered by technical breakdowns and reinforced by bearish fundamentals. After breaching the 50-day moving average at $3.274, November contracts quickly fell through minor support at $3.122 before bottoming at $3.089 and settling at $3.106, down 4.99% on the day. The breakdown positions $3.063 as the next near-term support level, with a more significant demand zone sitting between $2.986 and $2.938.

Are Warm Weather and Ample Storage Squeezing Natural Gas Bulls?

Traders sold aggressively on fresh signs that U.S. natural gas storage levels remain comfortable and weather forecasts are moving against heating demand. U.S. inventories as of October 3 are 4.5% above the five-year seasonal average and 0.3% higher year-over-year. The latest EIA injection came in at +80 Bcf, above consensus expectations of +77 Bcf, although still below the five-year average build of +94 Bcf.

Adding to the bearish tone, forecasts from Atmospheric G2 showed warmer-than-normal temperatures expected across the eastern U.S. between October 20–24—further dampening near-term heating demand expectations. With weather-driven demand easing, the market is showing sensitivity to even modest oversupply signals.

Production Levels Hold Near Records as Drilling Activity Climbs

Production remains strong and continues to pressure prices. On Friday, U.S. (lower-48) dry gas output was reported at 108.1 Bcf/day, a 5% increase year-over-year, according to BNEF. The EIA this week raised its 2025 production estimate to 107.14 Bcf/day, up from 106.60 Bcf/day in September. Meanwhile, Baker Hughes reported an uptick in active gas rigs to 120, just four rigs shy of the two-year high.

Even with lower-48 state gas demand down 6.7% year-over-year at 66.0 Bcf/day, U.S. LNG export flows remain stable, coming in at 16.0 Bcf/day (+1.6% w/w). However, this marginal uptick has not been enough to offset the growing production and softening domestic demand.

Electricity Demand Adds Mild Support—Is It Enough?

There was a modest bullish note from the power sector. U.S. electricity output rose 2.91% y/y for the week ending October 4, while 52-week cumulative generation climbed 2.89% y/y. This may offer limited upside support for natural gas, given its role in power generation. However, without colder temperatures or a meaningful pullback in production, the support is likely temporary.

Bearish Outlook as Key Technical and Fundamental Levels Break

With futures breaking through critical technical support and storage staying above seasonal norms, natural gas remains under heavy pressure. Unless colder weather emerges or production retreats, the path of least resistance is to the downside. Traders should watch for a test of the $3.063 level, with stronger support eyed in the $2.986–$2.938 range. The near-term outlook remains bearish.

More Information in our Economic Calendar.