Nat-Gas Prices Rebound Ahead of August Contract Expiration

August Nymex natural gas (NGQ26) on Wednesday closed up +0.063 (+2.37%).

Nat-gas prices rebounded from a 3-month nearest-futures low and settled higher amid fund short covering as Wednesday was the last trading day for the August Nymex natural gas futures contract.  Prices have been under pressure over the past week as weather models shifted to show a cooler Midwest and East Coast in the near term, reducing the need for air conditioning.  The Commodity Weather Group said on Wednesday that forecasts call for normal to below-normal temperatures across the central and eastern US through August 7.

Also weighing on nat-gas prices on Wednesday is the outlook for a larger-than-normal build in US gas storage.  The consensus is that Thursday's weekly EIA nat-gas inventories will increase by +37 bcf for the week ended July 24, above the five-year average for the week of +26 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 Wednesday was 112.1 bcf/day (+3.9% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 82.2 bcf/day (-7.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 18.1 bcf/day (+2.0% 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 last 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.

Last 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 increase 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 27, gas storage in Europe was 56% full, compared to the 5-year seasonal average of 72% 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 24 rose by +1 rig to 127 rigs, below the 3-year high of 134 rigs set in February 2026.