September Nymex natural gas (NGU25) on Wednesday closed up +0.067 (+2.23%).

Sep nat-gas prices on Wednesday settled sharply higher for a second day on forecasts for hot temperatures over the next week and into mid-August that would boost nat-gas demand from electricity providers to meet demand for increased air-conditioning.  Forecaster Atmospheric G2 said Wednesday that forecasts shifted warmer for much of the US for August 11-15 and shifted warmer over the eastern two-thirds of the country for August 16-20.  

Nat-gas prices also garnered support Wednesday from expectations for a smaller-than-normal build in weekly nat-gas supplies.  The consensus is that Thursday's weekly nat-gas inventories rose +9 bcf for the week ended August 1, below the five-year average for the week of +29 bcf.

On Monday, nat-gas prices sank to a 3.5-month low on higher US nat-gas production and the outlook for even higher output in the near term. Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending August 1 rose by +2 rigs to a 2-year high of 124 rigs.

Lower-48 state dry gas production on Wednesday was 107.9 bcf/day (+5.0% y/y), according to BNEF.  Lower-48 state gas demand on Wednesday was 76.9 bcf/day (-6.8% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 16.1 bcf/day (+20.4% w/w), according to BNEF.

An increase in US electricity output is positive for nat-gas demand from utility providers.  The Edison Electric Institute reported Wednesday that total US (lower-48) electricity output in the week ended August 2 rose +0.9% y/y to 99,367 GWh (gigawatt hours), and US electricity output in the 52-week period ending August 2 rose +2.7% y/y to 4,259,351 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended July 25 rose +48 bcf, above the consensus of +41 bcf and the 5-year average of +24 bcf for the week.  As of July 25, nat-gas inventories were down -3.9% y/y, but were +6.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of August 4, gas storage in Europe was 70% full, compared to the 5-year seasonal average of 78% 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 1 rose by +2 to a 2-year high of 124 rigs.  In the past ten months, the number of gas rigs has risen from the 4-year low of 94 rigs reported in September 2024.