Natural Gas Futures Test $3 as EIA Projects Record-Setting Inventories

Natural gas futures are testing $3 as the EIA report projects inventories hitting 3,985 Bcf by the end of October, the highest level in 10 years. This projection is causing concern for bulls, who need a string of below-normal builds to change the conversation.

However, production is still on the rise. Lower-48 dry gas output hit 112.3 Bcf per day, up 4.0% from a year ago, and demand came in at 76.3 Bcf per day, up 2.4% year-over-year. This gap between supply and demand is why rallies keep stalling.

The EIA also raised its 2027 dry-gas production forecast to 116.0 Bcf per day, and Baker Hughes added two gas rigs last week, bringing the count to 132, just below the three-year high of 134 from February. More rigs mean more supply in the pipeline.

US LNG exports slipped to 18.5 Bcf per day, down 4.7% from the prior week, and European gas prices pulled back after hitting a 3.75-year high on Monday. This removed overseas support for natural gas futures.