Natural Gas Prices Decline Amid Increased US Production and Reduced Export Volumes

August Nymex natural gas (NGQ26) futures closed at $2.475 per million British Thermal Units (MMBtu), down 0.043 (-1.46%) on Monday, marking a two-month low. The decline reflects robust US production growth and reduced export volumes, which have increased domestic supply inventories.

Production in the Permian Basin reached over 23 bcf/day over the weekend, the highest level in two months. Meanwhile, gas flows to US LNG export terminals dropped to 17.5 bcf/day, the lowest in a month, further bolstering available domestic resources.

Market participants noted that forecasts for hotter US temperatures could support near-term demand, as power generators may increased natural gas consumption to meet air-conditioning needs through mid-July.

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The Commodity Weather Group highlighted a shift toward warmer conditions across the northern US until July 17, mitigating some downside risk. However, bearish sentiment persists due to speculative El Niño developments, which could reduce winter heating demand in the Northern Hemisphere.

According to BNEF, US dry gas production rose 5.5% year-over-year to 113.2 bcf/day, while demand increased 4.2% y/y to 77.4 bcf/day. LNG export flows totaled 17.5 bcf/day, down 5.8% from the previous week.

The EIA recently raised its 2026 production forecast to 111.2 bcf/day, up from 111.0 bcf/day in June, adding to pressure on prices. Analysts, however, point to tighter global LNG supplies as a potential medium-term supportive factor.

Qatar’s Ras Laffan Industrial City facility, which supplies nearly 20% of global LNG, reported extensive damage from Iranian attacks in March, reducing export capacity by 17% and potentially prolonging repair timelines through 2028-2030. This disruption could incentivize higher US LNG exports if other markets face shortages.

The Edison Electric Institute reported a 7.73% year-over-year increase in US electricity generation to 100,996 GWh for the week ending July 4, supporting demand. Annualized output through July 4 rose 2.33% y/y to 4,345,875 GWh.

EIA’s July 3 weekly report showed inventories rose 61 bcf, in line with forecasts and above the five-year average of 51 bcf. Stocks remain 0.8% below year-over-year levels but are 6.6% above seasonal norms. European storage was 51% full as of July 8, well below the 66% seasonal average, suggesting ample US LNG export potential.

Baker Hughes data indicated 126 active drilling rigs in the US as of July 10, stable from the prior week and below February’s 2.5-year high of 134.

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