Nat-Gas Prices Recover Some Ground After Recent Plunge

September Nymex natural gas prices staged a modest recovery Wednesday, closing up 0.71% after hitting a 9-month low, yet remain under significant bearish pressure. This pressure is primarily driven by forecasts for cooler US temperatures reducing demand, the EIA's upward revision of 2025 and 2026 natural gas production forecasts to 106.44 bcf/day and 106.09 bcf/day respectively, and current near-record high US production. Compounding the bearish outlook are expectations for a substantial 54 bcf inventory build in the upcoming EIA report and recent declines in US electricity output.

Analysis

September Nymex natural gas is exhibiting significant bearish pressure, despite a minor daily recovery of +0.71% after hitting a 9-month low. The market's weakness is fundamentally driven by a robust supply outlook and softening near-term demand. US dry gas production is operating near record levels at 108.6 bcf/day, a 5.4% year-over-year increase, and this trend is expected to continue with the EIA raising its 2025 and 2026 production forecasts to 106.44 bcf/day and 106.09 bcf/day, respectively. On the demand side, forecasts for cooler temperatures are expected to reduce power burn, a trend already visible in the -1.9% year-over-year decline in US electricity output for the week ending August 9. While the prior week's inventory build was a bullishly low +7 bcf, the market anticipates a substantial +54 bcf injection in the upcoming report, far exceeding the 5-year average of +33 bcf. Although US inventories are -4.3% below last year's levels, they remain a comfortable +5.9% above the 5-year average, indicating adequate domestic supply which overshadows concerns about lower European storage levels.

Key Decisions for Investors

• Given the confluence of near-record US production, upwardly revised supply forecasts, and moderating weather-driven demand, a bearish or cautious outlook on natural gas futures is warranted in the near term.
• Investors should closely monitor the upcoming weekly EIA storage report; an inventory build near the +54 bcf consensus would confirm the oversupply thesis and could exert further downward pressure on prices.
• While the active rig count has slightly dipped from its 2-year high, the sustained level of production remains the dominant market driver, suggesting that any significant price recovery would require an unexpected supply disruption or a sharp reversal in demand trends.