Natural gas posts second weekly gain despite weak near-term demand
The October Henry Hub contract advanced 4c this week to $3.03/MMbtu, bringing total gains over the past two weeks to 23c. While this was the second week of higher prices for the prompt month, the rest of the curve moved lower, reversing gains from last week. The Winter ‘25/’26 strip lost 4c to settle at $3.79/MMbtu and Summer ’26 fell 6c to $3.72/MMbtu.
The recovery in prompt prices has come despite little improvement in underlying fundamentals. Last week ended with two-week weather forecasts showing temperatures potentially rising above the ten-year average by mid-September, however this outlook had reversed by the end of last weekend. While forecasts now show temperatures warming up to the ten-year average around mid-September, this is still a relatively week outlook for power demand. Reduced weather-driven demand should result in more above-average storage builds and keep pressure on prompt pricing.
Meanwhile, Lower-48 gas production dropped this week, with volumes falling to 106.3 Bcf/d, according to data from S&P. This has primarily been driven by maintenance in the Northeast and South Central. This drop in supply should prove temporary as pipeline work concludes over the next week.
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, Priced In)
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, 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.
Commodity Interest Trading involves risk and, therefore, is not appropriate for all persons; failure to manage commercial risk by engaging in some form of hedging also involves risk. Past performance is not necessarily indicative of future results. There is no guarantee that hedge program objectives will be achieved. Certain information contained in this research may constitute forward-looking terminology, such as “edge,” “advantage,” ‘opportunity,” “believe,” or other variations thereon or comparable terminology. Such statements and opinions are not guarantees of future performance or activities. Neither this trading advisor nor any of its trading principals offer a trading program to clients, nor do they propose guiding or directing a commodity interest account for any client based on any such trading program.