Nat-Gas Prices Slip as US Weather Forecasts Turn Cooler

On Tuesday, natural gas (NGV26) prices slipped by 1.06% as forecasts indicated cooler weather in the US, which could lower demand for natural gas used in air conditioning. Forecaster Vaisala predicted temperatures below normal in the Northeast at the start of the weekend. Despite losses in gas prices, support from a rally in European gas prices limited the decline.

European gas prices reached a 3.5-year high due to concerns over a prolonged closure of the Strait of Hormuz caused by the US-Iran conflict. In the US, dry gas production was 114.0 billion cubic feet per day, up 5.5% year-over-year. Meanwhile, gas demand in the lower 48 states was 79.7 billion cubic feet per day, up 14.7% year-over-year.

LNG net flows to US export terminals were 19.5 bcf/day, a 12.0% week-over-week increase. Positive factors for gas prices included a rise in US electricity output, with the Edison Electric Institute reporting a 6.1% year-over-year increase in the week ending August 22. However, a bearish factor was the EIA's projection of record-high nat-gas storage levels, which could indicate excess supply.

The EIA also raised its 2027 US dry gas production estimate to 116.0 bcf/day. Speculation that a powerful El Niño weather system would bring warmer temperatures to the Northern Hemisphere this fall and winter, reducing nat-gas heating demand, acted as a bearish medium-term factor. Nat-gas inventories were down 1.0% year-over-year and 5.5% above their five-year seasonal average as of August 21, signaling ample supplies.

As of August 30, European gas storage was 65% full, below the 5-year seasonal average of 82%. Baker Hughes reported a 5-rig increase in active US nat-gas drilling rigs for the week ending August 28, nearing a three-year high.