The October NYMEX contract rose 7c to settle at $2.90/MMBtu, partially reversing last week’s 15c decline. Despite this, much of the forward curve traded lower. The Winter ‘26/’27 strip fell 7c to settle at $3.29/MMBtu, which is a new low for the seasonal strip. Summer ’27 lost 2c to finish the week at $3.02/MMBtu.
The seasonal strip for this upcoming winter has steadily trended lower over the past several months, reaching new lows of less than $3.30/MMBtu this week. Several factors have weighed on this tenor, mainly rising supply from the Permian and expectations of a potentially warmer winter due to the forecasted super El Niño. A rising Lower-48 storage surplus through much of this summer also weighed on pricing, but for the past five weeks the surplus has narrowed considerably. Surprisingly, the smaller surplus has had little impact on winter pricing. This is potentially due to the narrowing surplus having been driven by strong power demand and hot temperatures, and with summer cooling demand fading, the market may once again shift into an oversupplied regime.
Despite falling prices, call-put option skew has been rising. This dynamic can be seen across the entire curve for natural gas options but is especially pronounced for the Winter ‘26/’27 season, with skew now at the highest level since early 2026. This can be a benefit to producers who use costless collars, as it can allow for a higher floor price. While skew for the next two winter seasons is strong, it is not as pronounced in the next two summer seasons, although these strips are also in call skew, and not put skew as has been the case in some historical periods.
This week’s EIA report showed the Lower-48 storage surplus shrank for a fifth week, and by the most since last winter. Inventories are now 118 Bcf above the five-year average, the smallest surplus since March. However, cooler temperatures over the next two weeks may result in storage builds once again rising above the five-year average rate and undoing some of the recent tightening.
Natural Gas Factors
Price Trend. (Bearish, Priced In) The October Henry Hub contract has traded in a narrow range between $2.80/MMBtu and $3.00/MMBtu during the month of September, after trending lower through much of summer 2026, and rallying during August.
Storage Level. (Bearish, Priced In) The storage level is a bearish priced-in factor due to the high levels of gas in inventories relative to the five-year average. According to the latest EIA weekly natural gas inventory report, Lower-48 storage is now at a surplus of 118 Bcf to the five-year average but 122 Bcf lower than last year.
LNG Outages. (Bearish, Surprise) Feed-gas levels are at their near max capacity, and if there's any unplanned maintenance event or an outage, it may act as a surprise bearish factor for natural gas prices. An outage at Freeport LNG weighed on feedgas demand in late summer.
LNG Schedule. (Bullish, Mostly Priced In) With a significant amount of new LNG feedgas demand coming this year and the next few years, if these facilities startup sooner than anticipated it should be a bullish factor for gas prices. One example of this occuring is the recent startup of Plaquemines LNG, which saw feedgas levels reach more than 1 Bcf/d much sooner than anticipated.
2H26 Permian Pipes. (Bearish, Somewhat priced in) Pipeline capacity out of the Permian is set to expand later this year, unlocking more gas supply. If the new Blackcomb pipeline fills quicker than expected, this could pose a bearish surprise to gas prices. As of early September, both the Blackcomb and Hugh Brinson pipelines have started up earlier than expected and are flowing small amounts of gas.
Historic El Nino. (Bearish, Surprise) The NWS is forecasting the strongest El Nino on record this winter. In the past, a strong El Nino has typically resulted in warmer winters for the Lower-48, especially the Northeast and Midwest regions. With this event expected to be the strongest ever recorded, it is increasing the risk of an extremely mild winter, which would be a bearish factor for gas prices.
