October Nymex natural gas (NGV26) on Thursday closed up +0.012 (+0.43%).
Nat-gas prices rebounded from a 2-week low on Thursday and settled higher. Short covering emerged in nat-gas on Thursday, supported by carryover from a rally in European nat-gas prices to a 3.75-year high. European nat-gas is soaring as sharply reduced supplies from the Middle East due to the closure of the Strait of Hormuz from the US-Iran war may boost European demand for US gas supplies. European nat-gas storage levels are well below normal, a bullish factor ahead of winter, when demand typically surges.
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Nat-gas prices also have support from forecasts of warm US weather that could boost nat-gas demand from electricity providers to power increased air conditioning use. The Commodity Weather Group said above-average temperatures are expected across the South and Southeast through September 19.
Nat-gas prices initially moved lower on Thursday amid a larger-than-expected increase in weekly nat-gas storage. The EIA reported Thursday that nat-gas inventories rose +40 bcf in the week ended September 4, above expectations of +34 bcf.
Hotter US temperature outlooks reinforce expectations that a “Super El Niño” weather event 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 Thursday was 113.4 bcf/day (+3.7% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 79.4 bcf/day (+14.3% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Thursday were 19.7 bcf/day (+3.1% w/w), according to BNEF.
As a positive factor for gas prices, the Edison Electric Institute reported Thursday that US (lower-48) electricity output in the week ended September 5 rose +19.69% y/y to 100,302 GWh (gigawatt hours). Also, US electricity output in the 52 weeks ending September 5 rose +3.00% y/y to 4,392,478 GWh.
As a bearish factor, the US Energy Information Administration (EIA) on August 11 projected that US nat-gas storage levels will swell to 3,985 bcf at the end of October, the highest level in 10 years and 5% above the five-year average. Last Monday, the EIA raised its 2027 US dry natural gas production estimate to 116.0 bcf/day from 115.3 bcf/day projected in July.
Thursday's weekly EIA report was bearish for nat-gas prices, as it showed a +40 bcf increase in US nat-gas inventories for the week ended September 4, above expectations of +34 bcf, but below the 5-year weekly average of +52 bcf. As of September 4, nat-gas inventories were down -2.7% y/y and +4.8% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of September 8, gas storage in Europe was 67% full, compared to the 5-year seasonal average of 84% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ended September 4 fell by -2 to 130 rigs, just 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.