The Outlook for Hot US Temps Pushes Nat-Gas Prices Higher

October Nymex natural gas (NGV25) on Tuesday closed up +0.067 (+1.97%).

Oct nat-gas prices recovered from a 2-week low on Tuesday and rallied sharply on forecasts for late summer heat in the US that will boost nat-gas demand and limit the buildup of inventories ahead of the critical winter heating season.  Forecaster Atmospheric G2 said Tuesday that much hotter-than-normal temperatures are forecast across most of North America for September 21-25, which will boost nat-gas demand from electricity providers to power increased air conditioning usage.  Also, forecasts shifted warmer over the eastern two-thirds of the US for September 26-30.

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Higher US nat-gas production has recently been a bearish factor for prices.  Last Tuesday, the EIA raised its forecast for 2025 US nat-gas production by +0.2% to 106.63 bcf/day from August's estimate of 106.40 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

US (lower-48) dry gas production on Tuesday was 106.0 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 73.6 bcf/day (+1.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 15.2  bcf/day (+4.0% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended September 6 rose +1.03% y/y to 83,003 GWh (gigawatt hours), and US electricity output in the 52-week period ending September 6 rose +2.97% y/y to 4,264,559 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended September 5 rose +71 bcf, above the market consensus of +68 bcf and above the 5-year weekly average of +56 bcf.  As of September 5, nat-gas inventories were down -1.3% y/y, but were +6.0% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of September 14, gas storage in Europe was 81% full, compared to the 5-year seasonal average of 87% full for this time of year.

Story Continues

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending September 12 was unchanged at 118 rigs, slightly below the 2-year high of 124 rigs posted on August 1.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.

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

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