US natural gas futures dropped by about 6% on Friday, hitting a two-month low. The decline came as milder weather forecasts reduced expectations for demand over the next week. Front-month gas futures for November delivery on the New York Mercantile Exchange fell 15.6 cents, or 6%, to settle at USD2.64 per million British thermal units (mmBtu). This marked the lowest close since August 6, and the contract was in technically oversold territory for a third consecutive day.
The market showed little concern about supply meeting demand in the coming months. Futures for calendar 2027 fell to an almost five-year low of USD3.08 per mmBtu, while the 12-month futures strip dropped to a two-year low of USD2.90. Financial firm LSEG reported that average gas output in the US Lower 48 states slid to 111.6 billion cubic feet per day (bcfd) so far in October, down from record highs of 113.3 bcfd in August and September. However, output has since recovered, averaging about 113.3 bcfd over the past week.
Record output and mild spring weather earlier this year had kept gas inventories above the five-year average since March, peaking at 7.7% above normal in April. But hotter-than-normal summer weather led to significant withdrawals from storage to meet power demands, cutting the inventory surplus. Analysts estimated that the amount of gas in storage likely fell to 0.7% above normal during the week ended October 23, down from 1.0% above normal the previous week.
Looking ahead, meteorologists predicted milder-than-normal weather through November 7, which should keep heating demand low. Despite this, LSEG forecasted that average gas demand in the Lower 48 states, including exports, would rise from 106.7 bcfd this week to 107.3 bcfd next week and 112.5 bcfd in two weeks. The forecast for next week was lower than LSEG’s outlook on Thursday. Average gas flows to the nine major US LNG export plants rose to 18.2 bcfd so far in October, up from 17.9 bcfd in September, though still below the monthly record high of 18.8 bcfd in April.