Heatwave lifts US gas, but record supply limits gains — NRG-IA

The prolonged heatwave in the United States has put weather back at the center of the natural gas market. The NYMEX September futures contract closed on Friday, August 21, at $2.773 per million British thermal units (MMBtu), up 1.5%, after new forecasts maintained the outlook for high cooling demand. Just a day earlier, the same contract had lost over 3%, dropping to around $2.73/MMBtu under pressure from very high production. These near-opposite movements in two consecutive sessions show how sensitive the market has become to every meteorological update. Behind these fluctuations lies a conflict between two unusually powerful forces. Extreme temperatures are driving up electricity consumption and, with it, power plants' gas requirements. At the same time, US production is at record levels, and storage facilities still hold a significant surplus compared to the five-year average. The result is a market where heat can quickly push prices up, but where supply currently limits the magnitude of the increase. Texas electricity consumption nears all-time high once again The pressure exerted by temperatures is most visible in Texas. Peak hourly consumption in the ERCOT system reached 89,580 MW on August 18, following successive records for this month: 87,781 MW on August 15, 88,018 MW on August 16, and 89,128 MW on August 17. The system thus neared the absolute record of 91,089 MW set on July 22, 2026. Data for recent months are still subject to minor revisions during the settlement process, according to ERCOT. For the gas market, the link is direct. When temperatures rise, air conditioning drives electricity consumption to its peak, and gas-fired power plants become one of the primary flexible sources used to meet the load. Consequently, a prolonged period of extreme temperatures can quickly transfer pressure from the power grid to the natural gas market. The effect is already showing in the weekly storage balance. For the week ending August 14, US gas inventories increased by only 16 Bcf, far below the five-year average of 29 Bcf for the same week during the 2021–2025 period. A larger share of the available gas was absorbed by summer consumption, leaving fewer volumes for injection. High inventories prevent weather from turning pressure into a major rally However, the same statistics also explain the market's resistance to price hikes. As of August 14, the US had 3,169 Bcf of natural gas in storage. This volume was 28 Bcf, or 0.9%, below the level of the same period last year, but 185 Bcf above the five-year average, equivalent to a 6.2% surplus. This buffer radically alters the impact of the heatwave on prices. An injection of just 16 Bcf shows that high demand is starting to erode the surplus, but the market enters the final weeks of summer with gas volumes that remain comfortable relative to historical norms. At the same time, production continues to supply the market with very high volumes. LSEG data cited by Reuters showed average production of approximately 111.4 Bcf/d in the Lower 48 since the beginning of August, surpassing the monthly record of 110.7 Bcf/d recorded in July. It was precisely this high supply that contributed to the over 3% drop in the futures contract during Thursday's session, even after a period of above-normal temperatures. The US market is thus in a rare situation: demand from the power sector is high enough to slow down gas accumulation in storage, but production is strong enough to prevent this pressure from translating into a broad and persistent price rally for now. Forecasts maintain weather pressure until early September The bulls' argument was strengthened on Friday with new forecasts from NOAA's Climate Prediction Center. For the August 29–September 4 period, the agency estimates that the highest probability of above-normal temperatures, at 70–80%, stretches from eastern Arizona to eastern Texas. The official forecast combines several meteorological ensembles, with the European ECENS model receiving the highest weight in the estimate for this period. This signal is relevant precisely because it pushes the risk of high temperatures beyond the traditional end of the meteorological summer. If temperatures remain above normal in major consuming regions, gas-fired power plants could continue to absorb significant volumes during a period when the market typically begins preparing for the shoulder season between summer and winter. The longer-term forecast for September 5–18 also favors above-average temperatures across most of the continental United States, although the level of accuracy decreases as the forecast horizon extends. This persistence turns the weather into a factor capable of continuing to compress the pace of storage injections. However, for the effect to become strong enough to structurally alter the market balance, the additional consumption must erode the inventory surplus faster than record production can replenish it. LNG adds a second source of demand for US gas…