Nat-Gas Prices Fade Mildly But See Support from Hotter US Weather Forecasts

August Nymex natural gas (NGQ26) on Thursday closed down -0.009 (-0.31%), giving back part of Wednesday's rally of +2.09%.

Nat-gas prices fell back as US natural gas inventories rose by more than the 5-year average.  Also on the bearish side was concern that Tropical Storm Bertha could disrupt liquefied natural gas (LNG) export facilities on the US Gulf Coast, leading to reduced nat-gas exports and larger domestic supplies. 

However, nat-gas prices continued to find support from forecasts of hotter weather in the coming weeks, potentially boosting nat-gas demand from electricity providers to power increased air-conditioning use.  The Commodity Weather Group on Thursday said weather forecasts shifted hotter, with above-average temperatures expected in the West through Aug 6.

A bearish factor for nat-gas prices in the medium term 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. 

US (lower-48) dry gas production on Thursday was 110.7 bcf/day (+1.5% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 77.8 bcf/day (-1.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 18.2 bcf/day (+4.8% w/w), according to BNEF.

Projections for higher US nat-gas production are negative for prices.  On July 7, the EIA raised its forecast for 2026 US dry nat-gas production to 111.2 bcf/day from a June estimate of 111.0 bcf/day.

As a positive factor for gas prices, the Edison Electric Institute reported on Wednesday that US (lower-48) electricity output in the week ended July 18 rose +2.0% y/y to 101,391 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending July 18 rose +2.3% y/y to 4,350,346 GWh.

Thursday's weekly EIA report was mixed for nat-gas prices, as nat-gas inventories for the week ended July 17 rose by +32 bcf, less than expectations of +34 bcf but above the 5-year weekly average of +30 bcf.  As of July 17, nat-gas inventories were down -0.6% y/y, and +6.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 20, gas storage in Europe was 54% full, compared to the 5-year seasonal average of 70% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending July 17 remained unchanged at 126 rigs, moderately below the 2.5-year high of 134 rigs set in February 2026.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.