Nat-Gas Prices Retreat on Bigger US Supplies and Cooler Temps

September Nymex natural gas (NGU26) closed down -0.099 (-3.56%) on Tuesday.

Nat-gas prices retreated on Tuesday amid news of larger US supplies and forecasts for cooler US temperatures that could reduce electricity demand to run air conditioning. 

Nat-gas prices came under pressure on Tuesday after Energy Transfer announced that the Hugh Brinson pipeline will be able to operate at its full transportation capacity of 1.5 bcf/day by September 1, allowing more gas supplies to flow from the Permian Basin to the US benchmark Henry Hub in Erath, Louisiana, boosting US domestic supplies.  

Forecasts for cooler US weather are also weighing on nat-gas prices, potentially reducing nat-gas demand from electricity providers to power air conditioning use.  The Commodity Weather Group said on Tuesday that forecasts shifted cooler, with below-average temperatures expected in the Midwest and Northeast through August 18.

Nat-gas prices tumbled to a 3.25-month nearest-futures (Q26) low last 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 Tuesday was 111.2 bcf/day (+2.2% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 80.7 bcf/day (+10.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 18.2 bcf/day (+0.1% 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 recently reported 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 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 August 1, gas storage in Europe was 57% full, compared to the 5-year seasonal average of 74% 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 31 was unchanged at 127 rigs, below the 3-year high of 134 rigs set in February 2026.