Nat-Gas Prices Fall in Sympathy with Crude Oil

Natural gas prices fell on Tuesday, mirroring a -3% drop in crude oil prices that reached a one-week low. The decline in nat-gas was somewhat contained due to forecasts predicting hotter weather in the United States, which could increase demand for electricity to run air conditioners. The Commodity Weather Group reported on Tuesday that temperatures were expected to rise above average in the Gulf, Midwest, and Mid-Atlantic regions from August 30 through September 8.

Crude oil prices experienced a significant drop as oil supplies were transported through the Strait of Hormuz. NuScale Power's short seller disclosed a warning to investors, while Barchart Brief's daily newsletter offered updates on various topics. US (lower-48) dry gas production on Tuesday was 110.9 bcf/day, representing a 1.4% year-over-year increase. Gas demand in the same region was 77.9 bcf/day, marking a 2.8% year-over-year surge.

As a positive aspect, the Edison Electric Institute reported on the preceding Wednesday that US (lower-48) electricity output in the week ending August 15 increased by 2.36% year-over-year, reaching 101,498 GWh. Additionally, US electricity output for the 52 weeks ending August 15 rose by 2.24% year-over-year, totaling 4,359,446 GWh.

Conversely, the US Energy Information Administration (EIA) projected on August 11 that US nat-gas storage levels would reach 3,985 bcf by the end of October, marking the highest level in a decade and 5% above the five-year average.

Existing US nat-gas inventories were +6.7% above their five-year seasonal average, indicating abundant supplies. A negative carryover from August 4 impacted nat-gas prices when Energy Transfer announced that the Hugh Brinson pipeline would operate at full transportation capacity of 1.5 bcf/day starting September 1. This would allow more gas supplies from the Permian Basin to reach the US benchmark Henry Hub in Erath, Louisiana, thereby boosting domestic supplies.

A medium-term bearish factor for nat-gas prices stems from speculation that a powerful El Niño weather system could lead to warmer-than-normal temperatures in the Northern Hemisphere during the upcoming fall and winter, thereby reducing nat-gas heating demand. The EIA's weekly report on August 14 showed a +16 bcf increase in US nat-gas inventories, exceeding market expectations of +14 bcf but falling short of the 5-year weekly average of +29 bcf.

As of August 14, nat-gas inventories were down -0.9% year-over-year and +6.2% above their five-year seasonal average, signaling sufficient nat-gas supplies.

As of August 23, gas storage in Europe stood at 63% capacity, compared to the 5-year seasonal average of 80% for this period. Baker Hughes reported on Friday that the number of active US nat-gas drilling rigs in the week ending August 21 declined by 1 to 127 rigs, slightly below the 3-year high of 134 rigs reached in February 2026. The author did not hold (directly or indirectly) any positions in the securities mentioned in this article. All information and data provided in this article serve informational purposes only.