September Henry Hub falls to multi-year low
The prompt September natural gas contract lost 21c this week, to finish at $2.70/MMbtu. This is the lowest level the September contract has traded at since 2021. The rest of the forward curve also moved lower, with Winter ‘25/’26 down 16c to $3.67/MMbtu, and Summer ’26 down 5c to $3.66. Weather forecasts showing below-average temperatures for the next two weeks have weighed on prices.
Lower-48 population weighted average temperatures are forecast to be well below the ten-year average for the next two weeks. This should result in materially weaker gas demand and higher storage builds, a trend already observed throughout summer 2025. This month has been one of the coolest Augusts of the past 25 years and the most recent two-week forecasts show this pattern continuing into the start of September. This should result in gas demand dropping to the lowest level since spring.
While weather-driven demand has been and continues to be weak, total gas demand has been modestly higher this summer compared to last summer, by 1.28 Bcf/d. This net year-over-year increase has been driven by higher LNG feedgas demand. However, gas production has remained quite strong throughout summer 2025, averaging 107 Bcf/d this month and 106.5 Bcf/d in July, according to data from S&P.
Based on our modeling, we continue to expect high storage levels to start winter, near 3.95 Tcf. However, assuming ten-year normal weather, inventories are anticipated to draw down below the five-year average by the end of winter, primarily due to continued increases in LNG demand.
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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