Nat-Gas Prices Climb on Smaller-Than-Expected Storage Increase

September Nymex natural gas (NGU26) on Thursday closed up +0.036 (+1.32%).

Nat-gas prices settled higher on Thursday on a smaller-than-expected storage increase. Weekly EIA nat-gas inventories rose +28 bcf in the week ended July 24, below expectations of +37 bcf.  Nat-gas prices extended their gains on forecasts for warmer US weather, potentially boosting nat-gas demand from electricity providers to power an expected increase in air conditioning use.  The Commodity Weather Group said on Thursday that forecasts shifted warmer, with above-normal temperatures expected in the western half of the US through August 13.

Nat-gas prices tumbled to a 3-month nearest-futures (Q26) low on Wednesday as recent below-normal US temperatures have reduced air-conditioning demand and allowed nat-gas inventories to be rebuilt.

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 112.4 bcf/day (+2.9% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 81.6 bcf/day (-4.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 18.2 bcf/day (+1.5% 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 last 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 supportive for nat-gas prices, as nat-gas inventories for the week ended July 24 rose by +28 bcf, less than expectations of +37 bcf but above the 5-year weekly average increase of +26 bcf.  As of July 24, nat-gas inventories were down -1.2% y/y, and +6.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of July 28, gas storage in Europe was 56% full, compared to the 5-year seasonal average of 72% 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 24 rose by +1 rig to 127 rigs, below the 3-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.