Nat-Gas Prices Fall on Bearish EIA Report

September Nymex natural gas (NGU26) on Thursday closed down -0.077 (-2.75%).

Nat-gas prices closed lower on Thursday due to a +36 bcf rise in nat-gas inventories in the weekly EIA report, larger than market expectations of +31 bcf. 

However, nat-gas prices remained underpinned by warm forecasts, which will boost nat-gas demand from utilities to meet increased air-conditioning demand.  Forecasts are for above-average temps across the South and Southeast through August 22, according to Commodity Weather Group.  Vaisala is forecasting above-normal temperatures for the West for Aug 22-26. 

As a bearish factor, the US Energy Information Administration (EIA) on Tuesday projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average.  US nat-gas inventories are currently +6.7% above their 5-year seasonal average, a sign of robust supplies. 

Nat-gas prices have some negative carryover from last 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 medium-term factor for nat-gas prices 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 113.5 bcf/day (+4.4% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 83.1 bcf/day (-0.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 17.9 bcf/day (-1.8% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended August 8 rose +7.0% y/y to 99,864 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending August 1 rose +2.3% y/y to 4,357,109 GWh.

Thursday's weekly EIA report showed a +36 bcf increase in US nat-gas inventories for the week ended August 7, larger than market expectations of +31 bcf and the 5-year weekly average of +33 bcf.  As of August 7, nat-gas inventories were down -1.0% y/y and +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 9, gas storage in Europe was 59% full, compared to the 5-year seasonal average of 76% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended August 7 fell by -3 to 124 rigs, modestly below the 3-year high of 134 rigs set in February 2026.