October Nymex natural gas (NGV25) on Tuesday closed up +0.067 (+1.97%).

Oct nat-gas prices recovered from a 2-week low on Tuesday and rallied sharply on forecasts for late summer heat in the US that will boost nat-gas demand and limit the buildup of inventories ahead of the critical winter heating season.  Forecaster Atmospheric G2 said Tuesday that much hotter-than-normal temperatures are forecast across most of North America for September 21-25, which will boost nat-gas demand from electricity providers to power increased air conditioning usage.  Also, forecasts shifted warmer over the eastern two-thirds of the US for September 26-30.  

Higher US nat-gas production has recently been a bearish factor for prices.  Last Tuesday, the EIA raised its forecast for 2025 US nat-gas production by +0.2% to 106.63 bcf/day from August's estimate of 106.40 bcf/day.  US nat-gas production is currently near a record high, with active US nat-gas rigs recently posting a 2-year high.

US (lower-48) dry gas production on Tuesday was 106.0 bcf/day (+4.8% y/y), according to BNEF.  Lower-48 state gas demand on Tuesday was 73.6 bcf/day (+1.0% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 15.2  bcf/day (+4.0% w/w), according to BNEF.

As a supportive factor for gas prices, the Edison Electric Institute reported last Wednesday that US (lower-48) electricity output in the week ended September 6 rose +1.03% y/y to 83,003 GWh (gigawatt hours), and US electricity output in the 52-week period ending September 6 rose +2.97% y/y to 4,264,559 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended September 5 rose +71 bcf, above the market consensus of +68 bcf and above the 5-year weekly average of +56 bcf.  As of September 5, nat-gas inventories were down -1.3% y/y, but were +6.0% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of September 14, gas storage in Europe was 81% full, compared to the 5-year seasonal average of 87% 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 September 12 was unchanged at 118 rigs, slightly below the 2-year high of 124 rigs posted on August 1.  In the past year, the number of gas rigs has risen from the 4.5-year low of 94 rigs reported in September 2024.