Nat-Gas Prices Drop on a Cooler US Weather Outlook

September Nymex natural gas (NGU26) on Thursday closed down -0.081 (-2.88%).

Nat-gas prices fell sharply on Thursday amid forecasts for cooler US temperatures, potentially reducing nat-gas demand from electricity providers to power air conditioning.  The Commodity Weather Group said on Thursday that forecasts trended cooler, shifting away from very hot weather previously forecast for the US South in the coming weeks. 

Nat-gas prices extended their losses on Thursday after weekly EIA nat-gas inventories rose more than expected.  The EIA reported that nat-gas inventories rose by +16 bcf for the week ended August 14, higher than expectations of +14 bcf.

US (lower-48) dry gas production on Thursday was 112.1 bcf/day (+2.8% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 83.4 bcf/day (+5.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 17.5 bcf/day (-2.5% w/w), according to BNEF.

As a bearish factor, the US Energy Information Administration (EIA) last 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 August 4, 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. 

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended August 15 rose +2.36% y/y to 101,498 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending August 15 rose +2.24% y/y to 4,359,446 GWh.

Thursday's weekly EIA report was slightly bearish as it showed a +16 bcf increase in US nat-gas inventories for the week ended August 14, above market expectations of +14 bcf, but below the 5-year weekly average of +29 bcf.  As of August 14, nat-gas inventories were down -0.9% y/y and +6.2% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 18, gas storage in Europe was 62% full, compared to the 5-year seasonal average of 79% 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 14 rose by +4 to 128 rigs, modestly below the 3-year high of 134 rigs set in February 2026.