September Henry Hub falls below $3/MMbtu in third weekly loss
The prompt month natural gas contract fell 9c this week, settling below $3/MMbtu and near a new year-to-date low. Forward prices also moved lower, with Winter ‘25/’26 losing 11c to finish the week at $3.95/MMbtu, and Summer ’26 falling 8c to settle at $3.74/MMbtu. These price moves came despite a relatively bullish EIA storage report and near-record feedgas LNG feedgas demand.
The EIA reported a 7 Bcf injection into underground storage for the week ending August 1. This was at the lower end of the expected range and resulted in a shrinking of the storage surplus from +195 Bcf to the five-year average to +173 Bcf. Despite this shrinking of the storage surplus, our projection for gas storage to start winter remains at 3.95 Tcf. If this projection pans out, this would be near the top of the five-year range for storage. With inventory projections where they are, it makes sense that some of the winter risk premium has come out of the market.
However, even if we begin winter with a high inventory level, our projections show a steep drawdown. Assuming ten-year average weather, our March 2026 storage projection sits at 1.7 Tcf, which is about 200 Bcf below the five-year average. This drawdown in inventories is driven by increasing LNG feedgas demand this winter as Plaquemines LNG, Corpus Christi Stage 3, and Golden Pass LNG start up. This scenario would provide bullish support to prices in 2026 and 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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