Nat-Gas Prices Climb on Lower-Than-Expected Inventory Build

September Nymex natural gas prices rose 2.69% on Thursday, primarily driven by a smaller-than-expected weekly inventory build of 13 bcf, significantly below the 5-year average. However, this short-term rally occurs amidst a broader bearish trend for natural gas, characterized by near-record US production, recent upward revisions to future production forecasts, and forecasts for cooler weather curbing demand, which have pushed prices to a 9.25-month low. Despite the inventory surprise, overall US supplies remain adequate, being 5.8% above their five-year seasonal average.

Analysis

September Nymex natural gas futures experienced a notable single-day rally of 2.69%, driven entirely by a bullish weekly EIA inventory report. The reported build of +13 bcf was significantly below both the consensus expectation of +18 bcf and the five-year average of +35 bcf, suggesting a tighter short-term supply dynamic than anticipated. However, this rally occurs within a broader bearish context, with prices having recently touched a 9.25-month low. The market faces substantial headwinds from the supply side, as U.S. dry gas production is tracking near record highs at 107.5 bcf/day (+5.2% y/y), and the EIA has recently increased its production forecasts for both 2025 and 2026. On the demand side, forecasts for cooler weather across the U.S. are expected to curb demand from electricity providers. Despite the smaller-than-expected weekly injection, overall U.S. natural gas inventories remain at a comfortable level, standing 5.8% above their five-year seasonal average, which mitigates immediate supply concerns.

Key Decisions for Investors

• View the current price strength as a short-term reaction to a bullish inventory report, while remaining cognizant of the persistent bearish pressure from near-record U.S. production and upwardly revised future output forecasts.
• Consider that the price spike may present a strategic opportunity for initiating bearish positions or trimming long exposure, given that overall gas inventories remain 5.8% above the five-year average and cooler weather is forecast to curb demand.
• Closely monitor subsequent weekly EIA reports to determine if the low inventory build is an anomaly, while also tracking U.S. production figures and LNG export flows for confirmation of the prevailing supply glut.