Gas Prices Test Support as Pipeline Outage Resurfaces Supply Woes

Natural gas prices are testing support in November after a pipeline outage caused prices to surge on Thursday. The storage surplus, which has been narrowing for six weeks, remains at 2.9% above the five-year average. European gas storage is still below its five-year average, but LNG exports from the US remain relevant heading into winter.

Production in the Lower-48 is high, with dry gas production tracking at 111.6 bcf per day, up 1.6% from a year ago. Demand was down 5.9% from last year, and LNG flows to US export terminals were up 2.2% from the prior week.

The EIA projects end-of-October storage near 3,985 bcf, the highest in a decade and 5% above the five-year average. The EIA also raised its 2027 dry natural gas production forecast to 116.0 bcf per day. With Baker Hughes reporting 134 active natural gas rigs last week, matching the three-year high from February, it's clear that production and drilling numbers have not changed.