Gas posts fourth weekly drop as storage surplus expands
Prompt month gas moved lower by 5c this week to settle at $2.94/MMbtu, as near-term prices remain weak. The rest of the curve also remained under pressure, with Winter ‘24/’25 falling 11c to $3.84/MMbtu, and Summer ’26 losing 2c to finish the week at $3.72/MMbtu. Strong storage builds continued, with EIA data showing the surplus to the five-year average reaching the highest level since January.
The EIA reported an injection of 56 Bcf for the week ending August 8, which pushed the storage surplus to the five-year average higher. The surplus shrank last week on a small 7 Bcf injection, but this week it reached 196 bcf above the five-year average, the highest level since the first week of 2025. This continues the summer 2025 trend of larger injections.
According to S&P data, 10.12 Bcf/d has been injected on average this summer, compared to the summer 2024 average of 7.61 Bcf/d and 9.12 Bcf/d in summer 2023. While power sector demand being lower this year has contributed to this, overall demand is slightly higher year-over-year. The biggest change in year-over-year market balances has come from supply. Lower-48 gas production is up 4.49 Bcf/d to average 106.39 Bcf/d, compared to the summer 2024 average of 101.90 Bcf/d.
Our projections, which assume ten-year average weather beyond the next two weeks, show storage climbing to 3.94 Tcf by the end of the injection season. Despite this, our projections show strong LNG demand leading to a drawdown in inventories below the five-year average by the start of summer 2026.
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.
S&D Balance. (Mostly Bullish, Priced In)
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. (Bearish, Priced in) With prices for next winter and beyond continuing to trend higher, producers have been hedging into the strength of forward prices.
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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