The natural gas market has tossed on a light sweater and officially turned the page on summer, sending prices lower across the forward curve, according to NGI’s Forward Look.
Benchmark Henry Hub September fixed prices ticked down only 2.1 cents through the Aug. 15-21 period, while the winter strip (November-March) slipped 4.8 cents to $3.153/MMBtu. Summer 2025 prices barely budged, edging 1.7 cents lower to $3.156. Notably, this is generally on par with where the winter is pricing, reflecting expectations of strong demand as LNG export capacity increases in the coming year.
Western U.S. gas markets posted the most significant declines across the forward curve as cooler weather has begun to move into the region. Notably, though, prices there remained the highest in the country.
After a record hot July and mostly toasty weather in August, the Pacific Northwest and California are cooling down. The National Weather Service (NWS) said a front over the Pacific Northwest coast would move slowly eastward to the northern High Plains to the Great Basin. The front then was forecast to move into southeastern California over the weekend. This should bring crisper temperatures in the mid-70s to California. Rain was also likely given the associated upper-level low.
NWS forecasters said monsoonal moisture and upper-level energy also would aid in producing heavy rain over parts of southeastern Utah, northern Arizona, southwestern Colorado and northwestern New Mexico.
Given the resulting lower cooling demand, Malin dropped 11.7 cents at the front of the curve to $1.636, and the winter strip slipped 6.6 cents to $4.570, Forward Look showed. Summer 2025 prices averaged 3.4 cents lower at $2.884.
In California, PG&E Citygate’s September contract plunged a nation-leading 17.6 cents through the week to $2.504. Winter shed 4.7 cents to average $5.101, and the summer slipped 4.2 cents to $3.944.
The SoCal Border Avg. September contract was down 12.0 cents to $1.853, the winter down 5.3 cents to $4.533 and the summer down 2.2 cents to $3.232.
Alongside the lighter cooling demand, more natural gas should be available for winter stocking. The Pacific region was the only region other than the South Central to post a withdrawal in the government inventory report covering the reference period ending Aug. 9. The 2 Bcf pull narrowed the Pacific region’s surplus over the five-year average down to less than 10%.
In its most recent report, the Energy Information Administration (EIA) said Pacific stocks increased by only 1 Bcf to 288 Bcf, keeping the surplus to the five-year average intact. Notably, however, inventories are nearly 20% above the five-year average.
‘Falling Knives Everywhere’
The EIA’s latest storage report proved to be a doozy overall. After three consecutive bullish data points suggesting the balance had tightened considerably, total working gas in storage had risen by a larger-than-expected 35 Bcf during the week ending Aug. 16.
The 35 Bcf injection compared with estimates ranging from a 20 Bcf build to a 42 Bcf build. NGI modeled a 27 Bcf injection.
Last year, 23 Bcf was added to storage during the similar week, while the five-year average stood at 41 Bcf, according to EIA.
“Falling knives everywhere,” East Daley Analytics’ Jack Weixel said of the resulting plunge in Nymex futures prices following the EIA report. Weixel was a guest Thursday on the online energy chat Enelyst.
The September Nymex futures contract fell to a $2.031 intraday low Thursday, with double-digit decreases seen through the November contract. The prompt month contract ultimately settled at $2.053 and went on to close another few pennies lower on Friday.
Noting the net zero change in week/week stocks in the South Central region, Weixel questioned whether it could be a “make-up number” from the prior report. The EIA said South Central salt stocks fell by 6 Bcf, while nonsalts added 6 Bcf.
The 6 Bcf injection into South Central nonsalt facilities perplexed most market observers on Enelyst. Weixel noted the gargantuan growth of the natural gas market, which has nearly doubled in size since 2011. “And a lot of that growth right down in the murky old South Central.”
Wood Mackenzie analyst Eric McGuire said moderating weather during the reference period was a significant contributor to the stronger injection this week. Renewable generation also recovered from the previous week’s slump.
Meanwhile, “salts have not been able to withdraw as aggressively as last year despite coming into 3Q2024 around the same levels,” McGuire said. “Salts are actually following the five-year average injection/withdrawal profile fairly closely so far through 3Q2024.”
Elsewhere, Midwest stocks rose by 19 Bcf, and East stocks increased by 12 Bcf. The Mountain region added 3 Bcf.
Total working gas in storage climbed to 3,299 Bcf, which is 221 Bcf above year-earlier levels and 369 Bcf above the five-year average, according to EIA.
What’s Ahead For Natural Gas?
Though there are pockets of strong heat still ahead, August may be on track to feature the weakest monthly cooling degree day total in seven years, according to EBW Analytics Group. With seasonally cooler weather on the way, power burns are likely to slide in the coming weeks and send prices lower.
At the same time, feed gas demand at U.S. liquefied natural gas export facilities continues to be lackluster. EBW senior analyst Eli Rubin pointed out that LNG facilities run best in cooler conditions, while pipeline maintenance also is inhibiting consumption. That said, Plaquemines LNG is likely to begin ramping up later this year, providing incremental demand even if operations ramp up slowly.
On the supply front, with prices already so low, producer activity remains top of mind for the market. Recent production readings continue to show output several Bcf below the all-time highs seen earlier this year.
While it is unclear how much of the cuts are due to pipeline maintenance versus a “true” economic shut-in, producers appear to be making good on pledges to reduce supply, according to Rubin. Subsequently, operators have helped to staunch the bleeding at the front of the curve – albeit before Thursday’s nosedive following the latest storage report.
Another round of supply reductions “could carry Nymex futures higher,” Rubin said. The “massive” 2.5 Bcf/d Matterhorn Express Pipeline “could enter service,” helping to debottleneck the Permian Basin during September.
“In our view, many analysts appear to be penciling in a November start-up date in accordance with a subcontractor schedule from earlier this summer,” Rubin said. “An earlier startup of Matterhorn could represent a bearish surprise to consensus estimates and quickly offset near-term upside.”
