Natural gas posts modest weekly gain despite Friday selloff
The December Henry Hub contract gained 15c this week to settle at $4.57/MMbtu, despite trading as high as $4.69/MMbtu during the week. The Summer ’26 seasonal strip gained 4c to finish at $4.00/MMbtu and Winter ‘26/’27 settled 1c higher at $4.56/MMbtu. Price action was particularly volatile this week amid changes in near-term weather forecasts and what appears to be a tighter underlying supply-demand balance. This week also marked the transition to the withdrawal season.
The week started off with gas prices moving higher on colder two-week weather forecasts, lifting expectations for near-term gas demand. Prices continued to advance throughout the week until a sharp move lower on Friday, driven by a sizeable warmer shift in weather forecasts. With the Winter ‘25/’26 season now beginning, there should be continued volatility driven by weather forecasts.
Outside of weather, the underlying fundamentals appear to be tightening, as several new records were set for LNG feedgas demand while supply remained relatively stagnant. Data from S&P showed LNG feedgas demand averaging 19.46 Bcf/d this week, as Plaquemines LNG pushed above 4 Bcf/d in inflows. Meanwhile production averaged 106.84 Bcf/d, slightly higher than last week. Continued strength in feedgas demand should keep the supply-demand balance relatively tight this winter.
This week also represented a shift into net storage withdrawals from injections. The EIA reported a build of 45 Bcf for last week, with the next report to show a withdrawal from inventories. The final injection of 2025 puts inventories at 3,960 Bcf, or 172 Bcf above the five-year average to start the withdrawal season. However, we do expect this surplus to tighten toward the five-year average over the course of winter.
Natural Gas Factors
Price Trend. (Bearish, Priced In) Gas prices have moved lower this summer, but over the past several weeks the prompt Henry Hub contract has traded in a range around the $3.00/MMbtu level.
Winter S&D. (Bullish, Surprise)
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 204 Bcf above the five-year average but 4 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.
Hurricane Season. (Bearish, Surprise) With the majority of US LNG feedgas demand located along the US Gulf Coast, and offshore gas production having declined relative to total US production in recent years, hurricanes are now a bearish factor for gas prices. In addition to potential impacts to export plants, hurricanes pose a risk to power demand in the US Southeast. North Atlantic hurricane seaosn typically peaks around mid-September.
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.
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.