Nat-Gas Prices Plunge on Cooler US Forecasts and EIA Production Forecast Increase

September Nymex natural gas (NGU25) fell sharply by 4.94% to a nine-month low on Tuesday, driven primarily by forecasts for cooler US temperatures in the Northeast and Southeast, and the EIA's upward revision of its 2025 and 2026 US natural gas production forecasts. The EIA increased its 2025 projection by 0.5% to 106.44 bcf/day and its 2026 forecast by 0.7% to 106.09 bcf/day, signaling higher future supply. This bearish pressure outweighed a recent smaller-than-expected weekly inventory build, as current US natural gas production remains near record highs with active drilling rigs recently peaking at a two-year high.

Analysis

September Nymex natural gas (NGU25) experienced a significant sell-off, declining 4.94% to a nine-month nearest-futures low, driven by a confluence of bearish factors that overshadowed mixed demand signals. The primary catalysts were forecasts for cooler US temperatures in the Northeast and Southeast from August 17-21, which dampen near-term cooling demand, and a material upward revision by the EIA to its long-term production outlook. The EIA increased its 2025 US natural gas production forecast by 0.5% to 106.44 bcf/day and its 2026 forecast by 0.7% to 106.09 bcf/day, signaling a structurally oversupplied market. This outlook is substantiated by current near-record production levels, with Lower-48 dry gas output at 108.6 bcf/day (+5.6% y/y). While a recent weekly EIA inventory report was bullish, showing a smaller-than-expected build of +7 bcf, its impact was muted by the fact that total inventories remain 5.9% above their 5-year seasonal average, indicating sufficient supply. A minor dip in LNG export flows (-3.7% w/w) added further weight, while a modest rise in domestic gas demand (+1.9% y/y) was insufficient to counter the prevailing bearish sentiment.

Key Decisions for Investors

• Given the dominant bearish factors of rising long-term supply forecasts and weak near-term weather demand, investors should be cautious of further downside potential and consider that the path of least resistance for NGU25 prices is currently lower.
• Monitor upcoming weather forecasts for the late-August period closely, as a reversal to warmer-than-expected temperatures could provide a catalyst for a short-term price rebound from the current nine-month lows.
• The EIA's upward revision to 2025-2026 production forecasts reinforces a structurally bearish outlook; any price rallies driven by transient factors like a single bullish inventory report may represent selling opportunities for long-term strategists.
• While weekly inventory figures can cause volatility, the more critical metric to watch is the total storage level relative to the 5-year average, which at +5.9% continues to signal a well-supplied market and caps significant price upside.