Nat-Gas Prices Climb on Sweltering US Heat

October Nymex natural gas (NGV26) on Monday closed up +0.047 (+1.63%).

Nat-gas prices settled higher on Monday as forecasts for triple-digit temperatures over the coming week in the US will boost nat-gas demand from electricity providers to power increased air-conditioning use.  According to NatGasWeather.com, near-record high temperatures are expected in the southern and eastern US and across most of the East Coast from August 31-September 5. 

Gains in nat-gas prices were limited on Monday on signs of ramped-up US production.  On Sunday, lower-48 state US dry gas production rose to a near-record 115.0 bcf/day.

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 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 Monday was 114.6 bcf/day (+5.9% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 78.4 bcf/day (+17.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 19.6 bcf/day (+15.8% 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.  On Monday, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.

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 supported nat-gas prices, showing 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 28 rose by +5 to a 5-month high of 132 rigs, just below the 3-year high of 134 rigs set in February 2026.