Natural gas falls for another week, but long-term outlook improves
The June Henry Hub contract lost 3c to settle at $2.75/MMBtu, with forward prices also trading lower. The Winter ‘26/’27 seasonal strip lost 8c, falling to $3.91/MMBtu. Summer ’27 and Winter ‘27/’28 both fell 4c. Weak weather-driven demand continues to be the primary factor weighing on prices, but several infrastructure developments occurred this week, which could support the longer-term outlook.
NextDecade announced in their recent earnings call that progress on the Rio Grande LNG export plant being developed in Brownsville is ahead of the prior schedule. The developer said that gas could begin flowing to the plant in 2H26 and first LNG production could occur in 1H27, about six months ahead of the previous schedule. This acceleration of development should result in materially higher LNG demand over the course of 2027 and support the supply-demand balance as the first few trains ramp up.
On the supply side, Energy Transfer announced that the Hugh Brinson pipeline could begin flowing gas earlier than expected. The 2.5 Bcf/d pipe from the Permian Basin to the DFW area is still scheduled to enter service in Q426 but ET said it’s possible that gas flows could begin in Q3. This should be a welcome development for producers in West Texas exposed to Waha prices, which have been exceptionally weak lately. This pipe combined with the incoming Blackcomb pipeline in Q426 should expand egress capacity substantially and support increased gas production and west Texas basis pricing, at least for some time. However, basis pricing impacts will likely depend on how quickly these pipes fill up.
In the near-term, the weak price environment may be suppressing supply as some operators shut in gas production. Targa and Kinetic Midstream announced that some volumes in the Permian have been shut in, due to a combination of low Henry Hub prices and very weak basis pricing. If shut-ins continue, this should help to balance the market in the near-term.
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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