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.

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.