Prompt month gas posts second weekly loss while forward curve rises
The October and November Henry Hub contracts fell for a second week, but prices beyond that moved higher. The prompt contract fell 6c to $2.88/MMbtu, bringing total losses over the past two weeks to -23c. Meanwhile the Winter ‘24/’25 strip gained 2c to $3.75/MMbtu, and Summer ’26 gained 3c to $3.74/MMbtu.
While price action this week was mostly driven by changes in near-term weather forecasts, gas prices fell sharply on Thursday following the weekly EIA storage report. This resulted in prompt prices dropping below the $3/MMbtu level which prices have been trading around the past few weeks. This week’s storage report showed 90 Bcf was injected into inventories last week, about 4 Bcf more than the median expectation on Bloomberg. This report also showed the surplus to the five-year average expanded to the highest level since the first week of the year, now at +204 Bcf. This is the third consecutive weekly increase in the storage surplus.
While the recent increases in the storage surplus have put pressure on near-term gas prices, our expectation remains that the supply-demand balance should tighten this winter. Based on our modeling, we expected the surplus to the five-year average to shrink and turn into a deficit around February 2026, primarily driven by higher LNG feedgas demand. This assumes ten-year normal weather, which if weather-driven demand is materially higher or lower than normal could significantly impact this projection.
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) 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.
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