Nat-Gas Prices Fade Mildly But See Support from Hotter US Weather Forecasts

August Nymex natural gas (NGQ26) on Thursday closed down -0.009 (-0.31%), giving back part of Wednesday's rally of +2.09%.

Nat-gas prices fell back as US natural gas inventories rose by more than the 5-year average.  Also on the bearish side was concern that Tropical Storm Bertha could disrupt liquefied natural gas (LNG) export facilities on the US Gulf Coast, leading to reduced nat-gas exports and larger domestic supplies. 

However, nat-gas prices continued to find support from forecasts of hotter weather in the coming weeks, potentially boosting nat-gas demand from electricity providers to power increased air-conditioning use.  The Commodity Weather Group on Thursday said weather forecasts shifted hotter, with above-average temperatures expected in the West through Aug 6.

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 110.7 bcf/day (+1.5% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 77.8 bcf/day (-1.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 18.2 bcf/day (+4.8% w/w), according to BNEF.

Projections for higher US nat-gas production are negative for prices.  On July 7, 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.

As a positive factor for gas prices, the Edison Electric Institute reported on Wednesday that US (lower-48) electricity output in the week ended July 18 rose +2.0% y/y to 101,391 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending July 18 rose +2.3% y/y to 4,350,346 GWh.

Thursday's weekly EIA report was mixed for nat-gas prices, as nat-gas inventories for the week ended July 17 rose by +32 bcf, less than expectations of +34 bcf but above the 5-year weekly average of +30 bcf.  As of July 17, nat-gas inventories were down -0.6% y/y, and +6.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 20, gas storage in Europe was 54% full, compared to the 5-year seasonal average of 70% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending July 17 remained unchanged at 126 rigs, moderately below the 2.5-year high of 134 rigs set in February 2026.