Nat-Gas Prices Plunge on Cooler Weather Forecasts and Higher US Production

September Nymex natural gas prices plunged 4.29% to a 9.25-month low, primarily driven by forecasts for cooler US weather curbing demand and significantly increased US natural gas production outlooks. The EIA raised its 2025 and 2026 production forecasts, while current US dry gas production remains near record highs, contributing to ample supply. This bearish sentiment was further amplified by higher-than-expected inventory builds and reduced LNG export flows.

Analysis

September Nymex natural gas futures (NGU25) experienced a significant downturn, closing -4.29% lower at a 9.25-month low, driven by a confluence of bearish fundamental factors. The primary catalyst is a deteriorating demand outlook, with forecasts from Atmospheric G2 for cooler weather across the eastern two-thirds of the US, which is expected to curb electricity demand for air conditioning. This is compounded by a notable -6.1% week-over-week decline in LNG net flows to US export terminals. On the supply side, the market is contending with near-record production levels, evidenced by lower-48 dry gas output reaching 108.4 bcf/day, a 5.7% year-over-year increase. This robust current output is reinforced by the EIA's upward revisions to its 2025 and 2026 US production forecasts. The supply glut is further confirmed by inventory data, where the latest weekly build of +56 bcf surpassed both consensus and the 5-year average, pushing total inventories to 6.6% above their 5-year seasonal average and signaling adequate supply heading into the cooler months. While European gas storage is below its 5-year average, this has not been sufficient to offset the overwhelmingly bearish US-centric data.

Key Decisions for Investors

• Given the strong bearish sentiment from weather forecasts, rising production, and ample inventories, investors should be cautious of further downside pressure on natural gas prices in the near term.
• Monitor weekly EIA inventory and US production data closely, as the structural oversupply is the primary headwind and any significant deviation from this trend would be a key market-moving event.
• Consider that the European storage deficit (74% full vs 81% average) represents a potential source of future price support for LNG, but it is currently being overshadowed by the domestic US supply glut.