Natural gas rebounds towards $3 as power demand rises
The June Henry Hub contract gained 20c this week to settle at $2.96/MMBtu, the highest level since early April. Meanwhile, forward prices largely moved lower. The Winter ‘26/’27 strip fell 3c to finish the week at $3.87/MMBtu. Summer ’27 lost 5c to settle at $3.14/MMBtu, and Winter ‘27/’28 fell 4c to $4.04/MMBtu. Heating demand has essentially faded from the Lower-48, with cooling demand now the primary driver of weather-driven gas demand.
Weather forecasts for the next two weeks show temperatures consistently above 65 ºF. This results in only cooling degree days, rather than heating degree days, which will send power sector gas demand higher. Through the early part of next week, temperatures will be modestly above the ten-year average, but cool back towards a more normal pattern after that. The lower prices lately have also supported gas power demand, as it has made gas plants more economical compared to coal.
LNG feedgas remains weak as maintenance weighs on gas flows. Feedgas demand averaged 17.94 Bcf/d this week compared to 20.5 Bcf/d in April. Maintenance work at Sabine Pass, Corpus Christi, Cameron, and Freeport all coincided this week. This is typical for this time of year as annual planned maintenance begins. Warming temperatures along the gulf coast will also weigh on demand as it makes the facilities less efficient.
The drop in LNG demand has resulted in the weather-adjusted supply-demand balance normalizing over the past two weeks. From early March through last week, we calculate the supply-demand balance was actually undersupplied, outside of the impact of weather. However, the impact of bearish weather-driven demand more than offset any underlying tightness. For the past two weeks, we calculate the supply-demand balance as having been neutral.
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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