Nat-Gas Prices Fall in Sympathy with Crude Oil

September Nymex natural gas (NGU26) on Tuesday closed down -0.012 (-0.43%).

Nat-gas prices settled lower on Tuesday in sympathy with the -3% plunge in crude oil prices to a 1-week low.  Losses in nat-gas were limited on Tuesday amid forecasts for hot US weather, potentially boosting nat-gas demand from electricity providers to power air conditioning use. The Commodity Weather Group said on Tuesday that forecasts shifted to hotter, with above-average temperatures expected across the Gulf, Midwest, and Mid-Atlantic from August 30 through September 8. 

US (lower-48) dry gas production on Tuesday was 110.9 bcf/day (+1.4% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 77.9 bcf/day (+2.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 17.4 bcf/day (-2.9% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported last 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.

As a bearish factor, the US Energy Information Administration (EIA) on August 11 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. 

Last 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 23, gas storage in Europe was 63% full, compared to the 5-year seasonal average of 80% 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 21 fell by -1 to 127 rigs, modestly below the 3-year high of 134 rigs set in February 2026.