Nat-Gas Prices Rebound on Pre-Weekend Short Covering

October Nymex natural gas (NGV26) on Friday closed up +0.011 (+0.38%).

Nat-gas prices recovered from a 1-week low on Friday and settled higher on some pre-weekend short covering.  Nat-gas prices initially moved lower on Friday amid forecasts of cooler US weather, which could reduce nat-gas demand from electricity providers for air conditioning.  The Commodity Weather Group said Friday that forecasts shifted cooler, with above-average temperatures now covering a smaller portion of the South and Southeast from September 23 to October 2.

Monday’s rally in European gas prices to a 3.75-year high has provided carryover support to US gas prices. European nat-gas is soaring as sharply reduced supplies from the Middle East due to the closure of the Strait of Hormuz from the US-Iran war are keeping European nat-gas storage levels well below normal, a bullish factor ahead of winter, when demand typically surges.  The lack of nat-gas supplies from the Middle East could also boost European demand for US gas supplies.

In a bearish medium-term factor for nat-gas prices, the market is expecting a “Super El Niño” to bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, reducing heating demand for nat-gas. 

US (lower-48) dry gas production on Friday was 113.8 bcf/day (+4.9% y/y), according to BNEF.  Lower-48 state gas demand on Friday was 75.7 bcf/day (-0.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Friday were 19.2 bcf/day (+0.7% w/w), according to BNEF.

As a positive factor for gas prices, the Edison Electric Institute reported Wednesday that US (lower-48) electricity output in the week ended September 12 rose +16.1% y/y to 94,427 GWh (gigawatt hours).  Also, US electricity output in the 52 weeks ending September 12 rose +3.3% y/y to 4,405,549 GWh.

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.  Last 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.

Thursday's weekly EIA report was bullish for nat-gas prices, as it showed a +44 bcf increase in US nat-gas inventories for the week ended September 11, below expectations of +48 and below the 5-year weekly average of +74 bcf.  As of September 11, nat-gas inventories were down -3.9% y/y and +3.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of September 16, gas storage in Europe was 69% full, compared to the 5-year seasonal average of 85% full for this time of year.

Baker Hughes reported Friday that the number of active US nat-gas drilling rigs in the week ended September 18 rose by +2 to match the 3-year high of 134 rigs first 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.