The fairytale for the natural gas market is likely going to be a 2025 story as robust production and choppy demand continued to weigh down forward prices during the July 11-17 trading period, according to NGI’s Forward Look.
August forward prices averaged about 17.0 cents lower through the period, with some of the steepest declines occurring in the Southeast. Transco Zone 5, for example, dropped 31.0 cents at the front of the curve, Forward Look data showed.
Transco Zone 5 prices further out the forward curve also declined, with the balance of summer (August-October) down 19.3 cents to $2.248 and the winter 2024-2025 down 9.3 cents to $3.974.
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Elsewhere in the region, Florida Gas Zone 3 August prices averaged $2.622 on Wednesday, off 32.5 cents on the week, according to Forward Look. The balance of summer fell 24.8 cents to $2.534, while the prompt winter dropped 10.5 cents to $3.558.
For the Southeast, in particular, lagging gas demand for power generation has put a chokehold on prices. EBW Analytics Group noted that the region is expected to see near-term temperatures well short of the 10-year average. What’s more, forecasts have called for some of the lightest demand in more than a month over the next five days as weather systems track across the eastern half of the country.
“While still a hot June and July, weather forecasts have cratered a startling 47 cooling degree days over the past month,” EBW’s senior analyst Eli Rubin said.
Meanwhile, it’s been more than a week since former Hurricane Beryl slammed into Houston and knocked out power to more than 2 million electricity customers, including the Freeport LNG Development LP facility. The 2.1 Bcf/d liquefied natural gas export facility draws electricity from the grid to power operations, rather than on-site generation.
Freeport was scheduled to receive about 764 MMcd/d of feed gas on Friday, according to NGI’s U.S. LNG Export Flow Tracker. The facility announced plans to restart one of three trains this week after taking damage from Beryl.
Looking ahead, NatGasWeather said the potential for additional weather systems puts hotter-than-normal long-range forecasts at risk. Without any downpours, though, the July 28-August 10 outlook calls for “strong to very strong national demand,” according to the forecaster.
Slowly Dissipating Storage Surplus
The projected heat could be sufficient to trigger the very low injections projected earlier this summer, according to Rubin.
The latest storage data from the U.S. Energy Information Administration (EIA) highlighted the impact even one brief heat wave could have on supplies.
EIA on Thursday said inventories rose by only 10 Bcf for the week ending July 12, well below most estimates that were as high as 48 Bcf. NGI modeled a 12 Bcf increase in storage.
The injection compared bullishly with last year’s 43 Bcf increase and the 49 Bcf five-year average build.
Even though Beryl wiped out power across Houston for days after landfall, it did not go unnoticed to market participants on online energy chat Enelyst that portable generators – fueled by natural gas – are becoming almost a common household tool as a lawnmower.
Wood Mackenzie analyst Eric McGuire said, “I know lots of people running nat gas whole house generators back in Houston.”
The South Central withdrew a stunning 10 Bcf overall, mostly from salt facilities, according to EIA.
At the same time, large swaths of the country – including in the densely populated Northeast – experienced near-record temperatures and strong demand. Temperatures soared well into the 90s and low 100s in some areas beginning last week, with the intense heat suffocating most of the Eastern Seaboard through Wednesday.
This culminated in a modest 4 Bcf injection for the EIA’s East region.
Overall, Lower 48 inventories climbed to 3,209 Bcf, which is 250 Bcf higher than the same time last year. Over the past 15 weeks, the surplus to the five-year average has shrunk from 633 Bcf on April 5 to 465 Bcf on July 12.
With more than three months remaining in the traditional injection season, it’s likely that the worst of storage containment fears is in the rearview mirror, according to EBW. Citing the market maxim – “the cure for low prices is low prices” – Rubin said sharply lower Nymex futures prices have the most likely storage trajectory on pace for close to 3,850 Bcf, a “clearly manageable total.”
NGI’s Henry Hub forward curve shows the U.S. benchmark averaging $2.105 for the balance of summer and then rising to $3.161 for the prompt winter. Henry Hub Calendar Year 2025 prices are seen averaging at $3.25 before rising to around $3.63 in 2026.
“In our view, a rational market should aim for 3,900-3,950 Bcf in end-of-October storage to roll forward a portion of the surplus to meet winter 2024-25 supply needs, implying upside potential,” Rubin said. “Still, we acknowledge that the market has repeatedly failed to demonstrate the appetite for injections late in the season as local distribution companies reach predetermined storage targets – with a lack of injection demand potentially pulling forward weakness into the fall.”
