Hot US Temps and Below-Normal Storage Build Lifts Nat-Gas Prices

September Nymex natural gas (NGU26) on Thursday closed up +0.065 (+2.29%).

Nat-gas prices climbed to a 1-month high on Thursday and settled sharply higher on forecasts for hotter US weather, potentially boosting nat-gas demand from electricity providers to power increased air-conditioning use.  Record high temperatures are expected across the Southwest through this weekend, and the Commodity Weather Group said on Thursday that above-average temperatures are expected across nearly the entire US from September 1-10.

A below-average build in weekly US nat-gas storage also boosted prices on Thursday as EIA nat-gas inventories rose 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 Thursday was 112.6 bcf/day (+3.8% y/y), according to BNEF.  Lower-48 state gas demand on Thursday was 80.1 bcf/day (+11.5% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 19.5 bcf/day (+11.6% 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. 

Thursday's weekly EIA report was supportive for nat-gas prices as it showed a +15 bcf increase in US nat-gas inventories for the week ended August 21, right on expectations, but below the 5-year weekly average of +33 bcf.  As of August 21, nat-gas inventories were down -1.0% y/y and +5.5% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 25, gas storage in Europe was 64% 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.