Abundant US Nat-Gas Supplies Weigh on Prices

October Nymex natural gas (NGV25) on Monday closed down -0.082 (-2.84%).

Oct nat-gas prices fell for a third consecutive session on Monday and posted a 3.5-week low.   Nat-gas prices are being weighed down by negative carryover from last Thursday when the EIA reported a larger-than-normal build in nat-gas inventories.  As of September 12,  US nat-gas inventories are +6.3% above their 5-year seasonal average, a sign of abundant supplies.

Nat-gas prices recovered from their worst level on Monday as short-covering emerged on forecasts for warmer US weather, which will boost natural-gas demand from electricity providers to power air conditioning.  Forecaster Atmospheric G2 said Monday that forecasts shifted warmer across the central and northern US for September 27-October 1, and forecasts shifted warmer over much of the US for October 2-6.  

Higher US nat-gas production has recently been a bearish factor for prices.  Earlier this month, the EIA raised its forecast for 2025 US nat-gas production by +0.2% to 106.63 bcf/day from August's estimate of 106.40 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

US (lower-48) dry gas production on Monday was 106.7 bcf/day (+4.1% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 70.8 bcf/day (-5.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 14.4  bcf/day (-5.6% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended September 13 rose +0.83% y/y to 81,346 GWh (gigawatt hours), and US electricity output in the 52-week period ending September 13 rose +2.98% y/y to 4,265,230 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended September 12 rose +90 bcf, above the market consensus of +81 bcf and above the 5-year weekly average of +74 bcf.  As of September 12, nat-gas inventories were down -0.3% y/y, but were +6.3% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of September 16, gas storage in Europe was 81% full, compared to the 5-year seasonal average of 87% 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 September 19 was unchanged at 118 rigs, slightly below the 2-year high of 124 rigs posted on August 1.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.