Natural gas prices fell on Tuesday, with September Nymex natural gas (NGU26) closing down $0.027 (-0.97%), as the U.S. Energy Information Administration (EIA) projected storage levels to reach 3,985 billion cubic feet (bcf) by the end of October, the highest in 10 years and 5% above the five-year average.
Despite initial gains due to forecasts of hotter weather increasing demand for electricity, prices decreased after a larger-than-expected increase in storage inventories was reported. As of July 31, natural gas inventories were 6.7% above the five-year seasonal average, indicating strong supply levels. U.S. dry gas production was recorded at 112.0 bcf/day, up 2.3% year-over-year, while demand was slightly lower at 83.2 bcf/day.
Further pressure on prices comes from increased domestic supply, including the upcoming full operation of the Hugh Brinson pipeline at 1.5 bcf/day. Additionally, projections for a powerful El Niño weather system could lead to reduced heating demand this fall and winter, negatively affecting market prices.
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