August Henry Hub continues downward trend, with sharp weekly drop
The prompt natural gas contract fell 45c this week, to settle at $3.12/MMbtu. The rest of the curve settled lower as well, with the Winter ‘24/’25 strip finishing the week down 33c at $4.12/MMbtu, and Summer ’26 losing 20c to settle at $3.88/MMbtu. The August contract posted its lowest weekly close of 2025, as near-term prices remain under pressure from weak power sector gas demand. Meanwhile, Golden Pass LNG received its first pipeline gas shipments, ahead of the startup of Train 1.
While population-weighted Lower-48 average temperatures have been above the ten-year average for the past week, forecasts show temperatures falling below average for the first week of August. This should result in weaker gas demand and above-average injections into storage. Power burns have already been significantly lower this summer compared to last year. According to data from S&P, power sector gas demand has averaged 35.36 Bcf/d in Summer 2025, compared to 39.63 Bcf/d in Summer 2024. This is due to a combination of milder temperatures, higher prices encouraging more coal generation, and more renewables. This has led to expectations of higher storage levels to start winter with and pressured the Winter ‘25/’26 seasonal strip lower, with winter prices falling more than 40c over the past few weeks.
A more bullish factor for gas this week was the start of feedgas flowing into the Golden Pass LNG terminal. On Wednesday, 4 MMcf/d was shipped to the export plant on the Golden Pass pipeline, marking the first time gas has been recorded flowing to the plant. This is a supportive sign, as small volumes of feedgas often preclude plant startup.
AEGIS holds a neutral view on near-term prices and a bullish view on Winter ‘25/’26 and beyond. Swaps are recommended in the summer months, while costless collars may be preferred in the winter.
Natural Gas Factors
Price Trend. (Bearish, Priced In) Prompt prices have moved lower this summer, but the Winter '25/'26 seasonal strip, Summer '26, and Winter '26/'27 have remained strong and even trended higher.
Summer S&D . (Bearish, Mostly priced-in) Natural gas power burns have been lower this summer due to weaker weather-driven demand, higher gas prices supporting coal burns, and more renewables. This has led to a loosening of near-term fundamentals.
Storage Level. (Mostly 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, the surplus to the five-year average stands at 171 Bcf above the five-year average but 153 Bcf below last year.
Associated Gas Production.(Bearish, Priced In) Growth in associated gas production will be much slower than has beeen seen over the past few years, at least until the second half of 2026. Pipeline capacity out of the Permian Basin will begin to grow again next year, likely filling relatively quickly. These new Permian pipes should enter servicce around the same time as projects which will reroute gas around Houston, towards the border of Louisiana.
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.
Slow Supply Response (Haynesville). (Bullish, Surprise) If production remains near where it is currently and does not grow into winter, this would be a bullish factor for gas prices. As production growth in the Permian and Northeast should be relatively constrained by pipeline capacity until the second half of 2026, the Haynesville will likely be the primary engine of production growth in the near-term. After being flat through most of 2025, Haynesville production and drilling activity has begun to increase this summer. Production is now up about 1.5 Bcf/d from the start of the year, but remains down from levels seen two years ago.
LNG Schedule. (Bullish, Surprise) 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.
Hedge Activity. (Bullish, Priced in) Given recent declines in price, hedging activity has slowed compared to the start of the year, resulting in less selling pressure on the forward curve.
Hope. (Bearish, surprise) Market participants have been bullish on Winter '25/'26 and beyond for some time, given the expected rise in LNG feedgas demand. A lack of materialization of this bullish narrative could see winter prices deflate significanlty. Either a delay to LNG schedules, a warmer winter, or strong production growth could result in a repricing of these contracts.
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