Natural gas trades higher but remains in range
The prompt month Henry Hub contract gained 12c this week to settle at $3.20/MMBtu but remains down about 13c over the past two weeks. So far this month, the July contract has remained in a range between $3.00/MMBtu and $3.40/MMBtu. Meanwhile, the Winter ‘26/’27 strip remains around $3.80/MMBtu and Summer ’27 is at $3.20/MMBtu.
Lower-48 population-weighted temperatures from the start of the month to now have been about average, and July is looking similar, according to Commodity Weather Group. Given the two-week forecast and what pattern looks likely for July, June through July temperatures could come in between the ten-year average and thirty-year average. While this is not a particularly bullish outcome, it is also not exceptionally bearish and should keep storage builds within a normal range.
This week, the EIA reported a 73 Bcf injection into underground storage for the week of June 12. This was slightly larger than the median expectation of 73 Bcf, according to the Bloomberg survey. This kept the storage surplus to the five-year average flat at +151 Bcf. Based on current weather forecasts for the next two weeks, the storage surplus should expand slightly. Our modeling still shows inventories reaching about 3.91 Tcf by the culmination of the injection season, which would put Lower-48 storage about 110 Bcf above the five-year average at the start of winter.
Associated gas production may begin ticking higher soon, as Kinder Morgan’s 500 MMcf/d Gulf Coast Express Expansion out of the Permian is currently starting up. This event combined with a reduction in pipeline maintenance and improvements to demand has lifted Waha basis.
Natural Gas Factors
Price Trend. (Bearish, Priced In) The June Henry Hub contract has trended lower over the last few weeks, but rebounded this week towards $3/MMBtu.
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, Lower-48 storage is now at a surplus of 140 Bcf to the five-year average and 51 Bcf higher than 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, 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.
2H26 Permian Pipes. Pipeline capacity out of the Permian is set to expand later this year, unlocking more gas supply. If the new Blackcomb pipeline fills quicker than expected, this could pose a bearish surprise to gas prices.
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