Above-Average Build in Gas Storage Weighs on Nat-Gas Prices

August Nymex natural gas (NGQ26) on Thursday closed down -0.200 (-6.23%).

Nat-gas prices tumbled to a 1.5-month low on Thursday and settled sharply lower.  Above-average weekly US nat-gas storage levels undercut prices. The EIA reported on Thursday that weekly EIA nat-gas inventories rose by +61 bcf for the week ended July 3, above the five-year average for the week at +51 bcf. 

A bearish factor for nat-gas prices in the medium term is speculation that a powerful El Niño weather system will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing nat-gas heating demand. 

US (lower-48) dry gas production on Thursday was 113.5 bcf/day (+6.8% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 78.1 bcf/day (+0.1% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 19.0 bcf/day (-1.0% w/w), according to BNEF.

Projections for higher US nat-gas production are negative for prices.  On Tuesday, the EIA raised its forecast for 2026 US dry nat-gas production to 111.2 bcf/day from a June estimate of 111.0 bcf/day.

Nat-gas prices have medium-term support on the outlook for tighter global LNG supplies.  On March 19, Qatar reported “extensive damage” at the world’s largest natural gas export plant at Ras Laffan Industrial City.  Qatar said the attacks by Iran damaged 17% of Ras Laffan’s LNG export capacity, damage that will take three to five years to repair.   The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports. 

As a positive factor for gas prices, the Edison Electric Institute on Wednesday reported that US (lower-48) electricity output in the week ended July 4 rose +7.73% y/y to 100,996 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending July 4 rose +2.33% y/y to 4,345,875 GWh.

Thursday’s weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended July 3 rose by +61 bcf, right on expectations and above the 5-year weekly average of +51 bcf. As of July 3, nat-gas inventories were down -0.8% y/y, and +6.6% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 7, gas storage in Europe was 51% full, compared to the 5-year seasonal average of 66% full for this time of year.

Baker Hughes reported last Thursday that the number of active US nat-gas drilling rigs in the week ending July 3 rose by +1 to 126 rigs, moderately below the 2.5-year high of 134 rigs set in February 2026.