October Nymex natural gas (NGV25) on Tuesday closed up +0.012 (+0.40%).

Oct nat-gas prices on Tuesday posted a 4-week high and closed higher.  Nat-gas prices have carryover support from last Thursday when the EIA reported that US nat-gas supplies as of August 22 were down -3.5% from the same time last year.

However, nat-gas prices fell back from their best levels on forecasts for cooler late summer US weather that will curb nat-gas demand from electricity providers to power air conditioning.  On Tuesday, forecaster Atmospheric G2 said forecasts shifted cooler for the northern half of the US for September 7-11 and that below-average temperatures will persist for the East for September 12-16.  

Natural gas prices have been under pressure over the past 2.5 months, dropping to a 9.5-month low in nearest-futures prices last Monday, as forecasts for cooler late-summer weather emerged and as US gas production remains near a record high.  

Ramped-up US nat-gas production is another bearish factor for prices.  On August 12, the EIA raised its forecast for 2025 US nat-gas production by +0.5% to 106.44 bcf/day from July's estimate of 105.9 bcf/day.  The EIA raised its forecast for 2026 US nat-gas production by +0.7% to 106.09 from July's 105.4 bcf/day forecast.  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 107.0 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 71.2 bcf/day (+1.2% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 15.2 bcf/day (+0.3% 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 August 23 rose +7.7% y/y to 95,130 GWh (gigawatt hours), and US electricity output in the 52-week period ending August 23 rose +3.1% y/y to 4,270,960 GWh.

Last Thursday's weekly EIA report was bullish for nat-gas prices since nat-gas inventories for the week ended August 22 rose +18 bcf, below the consensus of +27 bcf and well below the 5-year weekly average of +38 bcf.  As of August 22, nat-gas inventories were down -3.5% y/y, but were +5.0% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 31, gas storage in Europe was 78% full, compared to the 5-year seasonal average of 85% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending August 29 fell by -3 to 122 rigs, just 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-year low of 94 rigs reported in September 2024.