Natural gas posts small weekly loss as August contract expires
The September henry Hub contract is now the prompt month, after the August contract settled at $3.08/MMbtu. September fell 5c this week to $3.11/MMbtu, bringing total losses over the past two weeks to 49c. Winter ‘25/’26 finished the week at $4.06/MMbtu, and Summer ’26 settled at $3.83/MMbtu.
Public companies have begun reporting Q2 earnings and forward guidance, providing some insight into how larger producers may be planning their production and activity for the remainder of the year. Two of the largest Haynesville producers, Expand and Comstock, both guided towards flat production going forward. This does not represent any change from their prior outlook. If production from the Haynesville does not rise substantially this winter, the supply-demand balance could tighten significantly, as LNG feedgas demand continues to grow and gas output from the Permian will be constrained until late 2026.
While producer guidance may show a more measured approach, expectations of demand over the next few years continue to grow. This week Venture Global announced they have made a final investment decision for the Calcasieu Pass 2 export terminal. The 2.67 Bcf/d plant will be located adjacent to the original Calcasieu Pass facility and enter service in late 2027.
With exports from the Gulf Coast continuing to grow, more pipeline capacity will be needed to supply this demand. WhiteWater Midstream announced this week that they would be boosting the capacity of the planned Pelican pipeline from 2 Bcf/d to 2.5 Bcf/d. This pipe will ship gas from the Haynesville area down to the Gillis Hub in southern Louisiana, starting in the first half of 2027.
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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