Nat-Gas Prices Climb on Smaller-Than-Expected Storage Increase

September Nymex natural gas (NGU26) on Thursday closed up +0.036 (+1.32%).

Nat-gas prices settled higher on Thursday on a smaller-than-expected storage increase. Weekly EIA nat-gas inventories rose +28 bcf in the week ended July 24, below expectations of +37 bcf.  Nat-gas prices extended their gains on forecasts for warmer US weather, potentially boosting nat-gas demand from electricity providers to power an expected increase in air conditioning use.  The Commodity Weather Group said on Thursday that forecasts shifted warmer, with above-normal temperatures expected in the western half of the US through August 13.

Nat-gas prices tumbled to a 3-month nearest-futures (Q26) low on Wednesday as recent below-normal US temperatures have reduced air-conditioning demand and allowed nat-gas inventories to be rebuilt.

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 112.4 bcf/day (+2.9% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 81.6 bcf/day (-4.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 18.2 bcf/day (+1.5% 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.

Thursday's weekly EIA report was supportive for nat-gas prices, as nat-gas inventories for the week ended July 24 rose by +28 bcf, less than expectations of +37 bcf but above the 5-year weekly average increase of +26 bcf.  As of July 24, nat-gas inventories were down -1.2% y/y, and +6.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 28, 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.