US Natural Gas Futures Fall 15% in a Week to $2.64 as Warm Forecasts Cut Heating Demand Outlook

Through the week ended Friday, Oct. 23, U.S. natural gas has gone from a heating-season bet to a warm-weather rout, while European prices keep climbing on supply fears tied to the Strait of Hormuz.

The November contract fell 5.6% on Friday to settle at $2.64 per million British thermal units. That put the weekly loss at 15%, the largest since early February.

Warm forecasts do the damage

Forecasts for the Lower 48 call for above-average temperatures through the end of October and into early November. That cuts heating demand at the point in the year when furnaces normally start to run.

Commodity Weather Group expects October and November combined to be the third-warmest such period since records began in 1950. The firm says that reinforces expectations for a mild winter driven by El Niño.

Meteorologist Ben Noll posted Saturday, Oct. 24, that temperatures in the 70s in the East this November look possible.

JPMorgan's head of global commodities research, Natasha Kaneva, said the impact of El Niño is "potentially bearish for natural gas through lower heating and power demand, given warmer, wetter and windier weather conditions."

Producers could feel it

Dennis Kissler of BOK Financial Securities said production cuts may be needed to stabilize prices if the warm trend persists across the Lower 48.

That is a forecast, not an announcement. No producer has been named as planning to cut output.

This is also a weather trade. A cold shift in the forecasts could erase part of the week's losses, because the price move rests on temperature outlooks rather than on a change in physical supply.

Europe is moving the other way

Across the Atlantic, the TTF benchmark for European gas reached about 93 euros per megawatt-hour on Friday, its highest since 2022. The cited cause is supply fears from ongoing disruptions in the Strait of Hormuz.

Europe is also heading into the colder months with gas storage well below seasonal averages. The withdrawal season has already begun.

Goldman Sachs commodities analyst Daan Struyven warned earlier this week that EU gas prices could reach 150 euros per megawatt-hour. His conditions: Gulf LNG exports stay at just one-quarter of normal levels and a more severe winter lifts heating demand.

A cold snap in Europe could force EU buyers to compete harder with Asian buyers for LNG cargoes. That is the mechanism that would bid prices up.

Two benchmarks, one weather variable

The gap between the two markets is stark. U.S. gas at $2.64 reflects domestic oversupply expectations under a warm outlook. European gas at 93 euros reflects scarcity risk from a disrupted Gulf supply route and thin storage.

Kaneva's read is that the same El Niño pattern depressing U.S. prices also offers Europe some relief through lower heating and power demand. Struyven's warning shows how quickly that could flip if the winter turns severe.

U.S. markets are closed for the weekend. The next test for the November contract is Monday's session, when traders will react to whatever the updated forecasts show for early November.

Whether Kissler's production-cut scenario materializes depends on the same variable. If the warmth holds into November, the pressure shifts from traders to producers.