Nat-Gas Prices Move Higher on Warm US Forecasts

Natural gas prices climbed higher on Friday due to predictions of warm weather in the United States during the latter part of August. This would increase the demand for natural gas by utilities to meet higher air-conditioning needs. Forecasts from the Commodity Weather Group predict above-normal temperatures in the South throughout the remainder of August, while Vaisala predicts above-normal temperatures for the West from August 22 to 26.

Despite cooler inflation data, a dissenting Federal Reserve official stated that "We Need To Act Now" on interest rates. Crude oil prices also rose due to ongoing tensions in Hormuz.

The U.S. Energy Information Administration projected on Tuesday that U.S. natural gas storage levels would reach 3,985 billion cubic feet by the end of October, marking the highest level in ten years and 5% above the five-year average. Currently, U.S. natural gas inventories are 6.7% above their five-year seasonal average, indicating a strong supply.

A bearish medium-term factor for natural gas prices is speculation that a strong El Niño weather system will bring warmer-than-normal temperatures to the Northern Hemisphere this fall and winter, thus reducing natural gas heating demand. U.S. dry gas production on Friday was 114.4 billion cubic feet per day, a 4.0% increase year-over-year. Lower-48 state gas demand was 81.6 billion cubic feet per day, a 1.3% increase year-over-year.

The Edison Electric Institute reported on Wednesday that U.S. (lower-48) electricity output in the week ending August 8 rose by 7.0% year-over-year to 99,864 gigawatt hours. Additionally, U.S. electricity output in the 52 weeks ending August 1 increased by 2.3% year-over-year to 4,357,109 gigawatt hours. The bearish weekly EIA report on Thursday revealed a 36 billion cubic feet increase in U.S. natural gas inventories for the week ending August 7, which was higher than market expectations of 31 billion cubic feet and the five-year weekly average of 33 billion cubic feet.

As of August 7, natural gas inventories were down 1.0% year-over-year and 6.7% above their five-year seasonal average, indicating ample natural gas supplies. As of August 9, gas storage in Europe was 59% full, compared to the five-year seasonal average of 76% full for this time of year. Baker Hughes reported on Friday that the number of active U.S. natural gas drilling rigs in the week ending August 14 rose by four to 128 rigs, modestly below the 3-year high of 134 rigs set in February 2026.

As of the publication date, Rich Asplund did not have any positions in any of the securities mentioned in this article.