NYMEX Henry Hub prices have seen a steady decline since the beginning of March, but the downward trend has slowed over the last month and a half. Winter ‘26/’27 Henry Hub prices have traded in the $3.30-$3.40/MMBtu range since the beginning of August. Meanwhile, the prompt contract has improved roughly 30c since the beginning of August.
The price action is correlated to changes in the storage levels. Working storage was at a surplus of 195 Bcf to the five-year average for the week ending August 7 and fell to a surplus of 95 Bcf for the latest week ending September 18. While still above the 5-year average, natural gas working inventory has lost 100 Bcf of surplus over the two months.
Heat, supportive of gas power demand, has been one of the key reasons for the decline in the storage surplus. Demonstrated in the chart below is the last two years of power demand vs weather normal power demand for those same two years. A divergence from normal weather occurred in early August and persisted through mid-September, causing elevated power demand for consecutive weeks.
It’s worth noting that renewable growth, specifically in wind and solar, has offset some power demand over the past two months. Also, other factors like increased LNG demand year over year are contributing to higher demand pull on natural gas in the summer months. Dry gas production increasing led by associated gas growth in Permian is also another key offsetting factor. However, with the possibility of an El Niño Winter, a late summer decline in storage levels has saved natural gas prices from falling even lower over the last month and a half.
