Nat-Gas Prices Tumble on a Larger-Than-Expected Storage Build

September Nymex natural gas (NGU26) closed down -0.048 (-1.79%) on Thursday.

Nat-gas prices tumbled to a 3.25-month nearest-futures low on Thursday and settled lower on a larger-than-expected storage build.  The EIA reported that nat-gas inventories rose by +33 bcf in the week ended July 31, above expectations of +30 bcf and well above the five-year average of +23 bcf. 

Losses in nat-gas prices were contained on Thursday amid 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-average temperatures expected across the Northeast and western US through August 10.

Nat-gas prices also have some negative carryover from Tuesday when 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. 

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 111.2 bcf/day (+1.8% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 83.2 bcf/day (+7.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 18.5 bcf/day (+3.3% 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 August 1 rose +0.9% y/y to 100,254 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending August 1 rose +2.1% y/y to 4,350,538 GWh.

Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended July 31 rose by +33 bcf, above expectations of +30 bcf and above the 5-year weekly average increase of +23 bcf.  As of July 31, nat-gas inventories were down -0.4% y/y, and +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 4, gas storage in Europe was 58% 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.