October Nymex natural gas (NGV26) on Wednesday closed up +0.052 (+1.79%).
Nat-gas prices settled higher on Wednesday as hotter US weather is expected to boost nat-gas demand from electricity providers as air-conditioning use increases. According to forecaster Vaisala, forecasts trended hotter across the Midwest and East for September 7-11 and shifted warmer in the Midwest for September 12-16.
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Expectations for a smaller-than-average seasonal build in US nat-gas storage also lifted prices on Wednesday. The consensus is that Thursday’s weekly EIA report will show nat-gas inventories increased by +32 bcf for the week ended August 28, below the five-year average of +37 bcf.
Nat-gas prices also had carryover support from a rally in European nat-gas prices. Fears that the closure of the Strait of Hormuz will be prolonged due to escalation of the US-Iran war pushed European nat-gas prices to a 3.75-year high on Wednesday. Europe receives about 10% of its nat-gas supplies through the strait from Qatar.
US (lower-48) dry gas production on Wednesday was 113.2 bcf/day (+3.4% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 79.5 bcf/day (+7.6% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Wednesday were 18.8 bcf/day (unchanged 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 August 29 rose +12.56% y/y to 96,357 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending August 29 rose +2.63% y/y to 4,375,966 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. 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 30, gas storage in Europe was 65% full, compared to the 5-year seasonal average of 82% 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. This article was originally published on Barchart.com