Forecasts for Near-Normal US Temps Undercut Nat-Gas Prices

August Nymex natural gas (NGQ26) on Monday closed down -0.104 (-3.62%).

Nat-gas prices sank to a 2.5-month nearest-futures low on Monday and settled sharply lower.  The outlook for cooler US weather, which diminishes the need for air conditioning, is weighing on nat-gas prices.  The Commodity Weather Group said on Monday that forecasts call for normal to below-normal temperatures across the central and eastern US for August 1-5.   

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 Monday was 113.1 bcf/day (+3.7% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 81.4 bcf/day (+2.7% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 18.1 bcf/day (+2.4% 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.

Last 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 increase 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 25, gas storage in Europe was 55% full, compared to the 5-year seasonal average of 71% 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.