Nat-Gas Prices Jump on Hot US Temps and Expectations of a Smaller Storage Build

September Nymex natural gas (NGU26) on Wednesday closed up +0.072 (+2.60%).

Nat-gas prices rallied to a 1-month high on Wednesday and settled sharply higher.  Forecasts for hot US weather that will boost nat-gas demand from electricity providers to power increased air-conditioning use pushed prices higher on Wednesday.  The Commodity Weather Group said on Wednesday that forecasts shifted to hotter, with well-above-average temperatures expected across the eastern two-thirds of the US from August 31 through September 4.

Expectations for a smaller-than-normal increase in weekly US nat-gas storage also supported prices on Wednesday.  The consensus is that Thursday’s weekly EIA nat-gas inventories will increase by +15 bcf for the week ended August 21, below the five-year average for the week of +33 bcf.  

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended August 22 rose +6.1% y/y to 100,895 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending August 22 rose +2.2% y/y to 4,365,212 GWh.

US (lower-48) dry gas production on Wednesday was 111.4 bcf/day (+3.2% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 79.0 bcf/day (+8.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 18.3 bcf/day (+8.3% w/w), according to BNEF.

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 24, gas storage in Europe was 63% full, compared to the 5-year seasonal average of 81% 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.