August Natural Gas Settles at $3.01 After 6% Drop on Bearish Storage

August NYMEX natural gas futures settled at $3.01 on Thursday, down $0.20 or 6.23%. It was the biggest single-session drop in weeks and the lowest close in about six weeks. The EIA storage report handed sellers their opening. The Super El Niño forecast made sure no one stepped in to buy the dip.

The 61 Bcf build matched consensus expectations. It beat the five-year average injection of 51 Bcf, and that gap is doing the damage. Total working gas inventories sit at 2,983 Bcf, only 15 Bcf below last year but 185 Bcf or 6.6% above the five-year average. The build came despite persistent summer heat across most of the country. Stronger wind generation during the reporting week picked up enough of the electricity load to let more gas flow into storage instead of getting burned at the plant. Bulls do not want to see that pattern in mid-July.

Thursday’s storage number was the trigger. The El Niño story is the narrative that follows traders home. NOAA’s experimental forecasts and several leading climate models now point to one of the strongest El Niño events since reliable records began. Ocean temperatures across the equatorial Pacific keep warming. Forecasters assign a high probability that the event peaks during winter. Natural Gas Intelligence meteorologists expect the pattern to keep the coldest Arctic air locked over northern Canada while the Pacific jet stream strengthens underneath. That gives the northern United States a warmer-than-normal winter with fewer major cold shots that drain storage and spike prices. The models are getting more confident, not less. Short sellers are not waiting for winter to confirm it. They are building positions around that scenario. The December contract is already showing it.

Bearish traders sliced through the 50-day moving average support before systematically taking out three swing bottoms at $3.151, $3.059 and $3.001. The downtrend was reaffirmed on the swing chart. The 50-day moving average at $3.186 becomes new resistance. Staying below it keeps sellers in control.

Lower 48 dry gas production hit 113.5 Bcf per day on Thursday according to BloombergNEF, up 6.8% from a year ago. Domestic demand averaged 78.1 Bcf per day. LNG feed gas deliveries slipped to 19.0 Bcf per day. The EIA recently raised its 2026 production forecast to 111.2 Bcf per day. Output is already running above that number. Baker Hughes reported the rig count added one to 126 active rigs. Drilling has come off the 134-rig peak from earlier this year. The decline is not fast enough to matter.

The southern two-thirds of the country is running 90s and triple digits through mid-July. That keeps power-sector gas burn alive. Edison Electric Institute reported electricity generation for the week ending July 4 jumped 7.7% year-over-year. The 52-week trend is up 2.3%. Summer heat is propping up power demand. It is a seasonal floor with an expiration date.

Ras Laffan is the other floor. Qatar’s LNG export complex took extensive damage from military strikes earlier this year. Repairs could stretch for years. That facility handles roughly one-fifth of global LNG export capacity. Reduced Qatari supply eventually pulls more demand toward U.S. LNG cargoes. That story is further out but it is real.

The February natural gas contract also plunged on Thursday. The move was not as severe as the nearby August contract. The trend is down on the swing chart. The first sign of strength will be a move through the nearest swing top at $3.969. Crossing to the strong side of the 50-day moving average at $4.039 would tighten up the trend. Ample supply in July has been exerting pressure on this winter contract. The Super El Niño story creates a “sell the rally” narrative. That type of trading will likely continue until the true winter forecasts arrive later in the year. A hot spell in July, August or September that increases demand and depletes storage could also lift prices. Short sellers should keep an eye on the Commitment of Traders reports. This futures contract can get oversold fast during a cold spell.