Natural Gas News: Bearish Forecast Builds as Storage and Output Outpace Demand

Will Hot Weather Be Enough to Offset Surging U.S. Supply?

Natural gas futures closed the week lower at $3.083, dropping 3.29% as stronger-than-expected production and inventory data outweighed a weather-driven rally attempt. Despite early support from hotter August forecasts, sellers regained control, pushing prices back toward key support levels as traders reacted to mounting supply signals.

Prices briefly climbed Friday on revised weather models showing heat intensifying across the Midwest, Southwest, and Texas (August 6–10), with the eastern U.S. following close behind (August 11–15). While that underpinned short-term cooling demand, it wasn’t enough to prevent a weekly decline after Thursday’s bearish EIA report and stronger rig count data.

EIA Storage Report Signals Oversupply Risk

The EIA reported a +48 Bcf injection for the week ending July 25—well above both the +41 Bcf consensus and the 5-year average of +24 Bcf. Inventories are now 6.7% above the 5-year norm, despite being 3.9% lower year-over-year. U.S. supply is clearly comfortable heading into peak summer burn, limiting upside potential for prices in the near term.

Production, Rig Counts and Demand Trends Send Bearish Signals

Production remains relentless. Lower-48 dry gas output hit 108.1 Bcf/day on Friday, up 3.4% y/y, while demand sagged to 76.1 Bcf/day, a sharp 13% decline y/y. Baker Hughes confirmed rising activity, with the U.S. gas rig count increasing by 2 to 124—marking a new 2-year high and extending a 10-month climb from last year’s lows.

LNG exports are holding steady, with flows to U.S. terminals at 15.2 Bcf/day (+2.3% w/w), but they’re not absorbing enough excess to tighten balances meaningfully. Europe’s gas storage levels—just 68% full versus a 5-year average of 76%—might limit short-term U.S. export upside as well.

Power Demand Rebounds but Lags Behind Supply Pace

Electricity generation is climbing. The Edison Electric Institute reported an 8.1% y/y increase in total U.S. output for the week ending July 26, hitting 98,772 GWh. This adds some tailwind for gas demand, particularly from utilities. However, it hasn’t been enough to counterbalance the production and storage surplus dragging the front-month lower.

Bearish Outlook as $2.574 Support Comes into View

Technically, natural gas futures remain below their 52-week SMA at $3.733 and continue to trend lower after rejecting $4.427 resistance. The next major downside level sits at $2.574. With fundamentals pointing to an oversupplied market and only short-term weather demand offering support, near-term sentiment remains bearish.

More Information in our Economic Calendar.