• Natural Gas Market Indicators

Natural Gas Market Summary

The U.S. natural gas market remains well supplied heading into the fall shoulder season, with strong production continuing to support growing global demand. A persistent heat dome across the South is supporting strong regional cooling demand and slowing the pace of storage injections, but the effect on total demand and Henry Hub prices has been muted. In the U.S. Energy Information Administration’s (EIA’s) August 2026 Short-Term Energy Outlook (STEO), the EIA lowered its forecast for the 2026 Henry Hub spot price more than 6 percent from the July STEO, from $3.67 to $3.44 per MMBtu. The annual spot price forecast has fallen more than 20 percent since the February 2026 STEO estimate of $4.31 per MMBtu, which was influenced by the sustained heating demand, record storage withdrawals, and temporary price spikes during Winter Storm Fern.  

In the global market, tightening supply-demand balances stand in stark contrast to the bearish domestic picture. U.S. LNG feedgas demand has temporarily softened because of export-terminal maintenance—Freeport alone has removed roughly 2 Bcf per day of nominal capacity—but the EIA expects that maintenance to conclude in late August, allowing more U.S. supply to reconnect with international markets where European and Asian prices remain substantially above Henry Hub. At the same time, lower-than-normal storage inventories in the European Union (EU) are adding another layer of market tightness. According S&P Global Energy, inventories were 60.8 percent full as of August 15 but remained below the five-year minimum for this point in the season. Consequently, the market’s central tension is shifting from summer weather toward whether record production can keep pace with recovering LNG exports and winter demand.

Natural Gas Prices Modest as Fall Shoulder Season Nears

Natural gas prices remain below $3 at the U.S. benchmark hub despite warmer than normal weather and climbing natural gas demand. The September Henry Hub contract has averaged $2.74 per MMBtu since it became the prompt-month price on July 30; the contract settled at $2.81 per MMBtu on August 19 and moved modestly lower intraday on Thursday. Current pricing sentiment suggests futures prices could average $3.14 per MMBtu over the next 12 months, a spread of 33 cents above the last settlement price. Since February 1, the prompt month has spent more time below the $3 mark than amid strong supply-side fundamentals.

Extreme Heat Grips the Southern U.S.

A sweltering heat wave has settled across the Southern U.S., bringing triple-digit temperature highs, extreme heat warnings across portions of North Texas, and widespread heat alerts stretching across the Southern Plains to the Southeast.

For the week ending August 15, temperatures in U.S. were 2.3 percent warmer than last year and 27.5 percent warmer than the 30-year normal, according to cooling degree day data weighted by electric home air conditioning customers. All regions were warmer than normal, while all regions except the West North Central, South Atlantic, East South Central, and West South Central were cooler than during the same period in 2025.

Looking ahead, the National Oceanic and Atmospheric Administration’s (NOAA) August 27 to September 2 outlook suggests that warmer temperatures across the South may persist into early September. Warmer-than-normal temperatures are favored across much of the West, Plains, South, Southeast, and Northeast, with the strongest probabilities concentrated in the Southwest and southern Plains. Near-normal temperatures are favored across portions of the Pacific Northwest, while cooler-than-normal conditions are favored across small portions of Washington and Oregon.

At the time of this writing, NOAA’s National Hurricane Center is monitoring Hurricane Lala and three disturbances in the Pacific. As of August 20, two of the disturbances have a high chance of cyclone formation in the next seven days, at 90 percent and 80 percent, respectively, while the third disturbance has a 20 percent chance of development. Lala is a Category 2 hurricane with maximum sustained winds near 100 mph and could affect more remote areas of the Northwestern Hawaiian Islands.  

Regional Demand Diverges as National Consumption Remains Stable

U.S. natural gas demand remains relatively stable week-over-week, according to preliminary data from S&P Global Energy (S&P Global). For the week ending August 20, total demand, including exports, declined by 1.0 percent while domestic demand decreased 1.3 percent. By sector, consumption shifted modestly, with residential and commercial demand declining 0.6 percent and electric power demand falling 2.0 percent, while industrial demand remained flat.

Relative to last year, demand trends showed somewhat greater variation. Total demand increased 2.1 percent, supported by stronger exports, while domestic demand declined 0.7 percent. The decrease in domestic consumption was driven largely by a 0.9 percent decline in electric power sector demand compared with the same period in 2025. Industrial demand also declined modestly, while residential and commercial demand increased 0.9 percent year over year, partially offsetting declines in the electric power and industrial sectors.

Regional electric power sector demand reflects the concentration of hotter conditions across the South. Southeast and Texas electric power demand both increased 5.4 percent week-over-week, consistent with increased cooling needs amid elevated temperatures. However, these gains were more than offset by weaker power demand elsewhere, including declines of 8.9 percent in the West, 8.3 percent in the Northeast, and 7.9 percent in the Rocky Mountain region. As a result, national electric power demand declined despite stronger consumption across key Southern markets.

New Annual Production Records in Sight

Lower 48 dry natural gas production continues to climb. For the month to date through August 20, production output is running 0.6 percent higher than the same period in July and nearly 3 percent higher than the same period last year, according to preliminary data from S&P Global. On a year-to-date basis, production is up 3.6 percent.

The EIA recently reported that marketed natural gas production is on track for a new annual record in 2026, expected to average nearly 123 Bcf per day for the year. Gains are being driven by increased associated gas production in the Permian basin and stronger Haynesville output in response to Gulf Coast demand for feedgas. According to the EIA’s August STEO, U.S. dry gas production is also on track to set a new record, expected to average 111.2 Bcf per day in 2026, a gain of 3.3 percent over the 2025 record.

European Storage Concerns Add Pressure to Global LNG Markets

LNG feedgas deliveries remain relatively muted amid ongoing maintenance at Freeport LNG. For the week ending August 19, feedgas flows averaged 17.1 Bcf per day, 12.8 percent lower than the early year daily record of 19.6 Bcf per day, according to preliminary data from Rystad Energy. Compared to last week, flows declined 1.5 percent but remained 11.0 percent higher than the same week in 2025. Year-to-date, deliveries have averaged 17.9 Bcf per day, up nearly 17 percent from the same period in 2025.

Despite softer near-term feedgas deliveries in the U.S., global LNG demand remains strong as shipping disruptions in the Strait of Hormuz continue to intensify competition for available cargos. Storage inventories in the EU remain below the five-year minimum as of August 15, according to S&P Global Energy. Similarly, Oilprice.com reports that European inventories are at their lowest level in 17 years, while supply available for purchase is tighter than it was in 2022 following Russia’s invasion of Ukraine. Although the European Commission has urged member states to lower their gas storage target from 90 percent to 80 percent ahead of the heating season, S&P Global analysis suggests that EU storage inventories may struggle to reach more than 75 percent full by the end of October.

These tightening global market conditions are also reflected in international benchmark prices. Futures prices at the Dutch Title Transfer Facility (TTF), Europe’s key natural gas trading hub, have risen 94.9 percent since the start of the conflict in Iran, increasing from $10.78 per MMBtu to $21.00 per MMBtu, according to data from Rystad Energy. In Asia, Japan Korea Marker (JKM) prices, have more than doubled over the same period, rising 103.3 percent from $10.63 per MMBtu to $21.61 per MMBtu. With both benchmarks elevated and European storage inventories lagging historical levels, securing additional LNG cargoes may remain costly, while competition between European and Asian buyers for flexible U.S. supplies could intensify as the winter heating season approaches.

Salt Storage Withdrawal Limits Weekly Injection

The EIA reported a net injection of 16 Bcf into lower 48 underground storage for the week ending August 14, bringing inventories to 3,169 Bcf. Withdrawals limited the weekly build, driven by an 18 Bcf decline in South Central salt storage. The East and Midwest recorded net injections of 15 Bcf and 19 Bcf, respectively, while the Mountain and Pacific regions posted combined net withdrawals of 6 Bcf. Lower 48 inventories currently stand 6.2 percent above the five-year average but nearly 1 percent below year-ago levels. In the August STEO, the EIA increased its outlook for average third-quarter 2026 working gas in underground storage to more than 3.6 Tcf, representing a 0.6 percent gain over the July STEO forecast.

Cross-Border Pipeline Flows Decline Modestly

Natural gas cross-border pipeline trade declined relative to last week for the week ending August 19. According to preliminary data from Rystad Energy, pipeline imports from Canada averaged 3.9 Bcf per day, down 8.4 percent week-over-week, while exports to Mexico averaged 6.5 Bcf per day, declining 2.5 percent. On a year-over-year basis, imports from Canada were 15.0 percent lower than during the same week in 2025, while exports to Mexico remained above year-ago levels, increasing 2.2 percent.

U.S. Rig Count Rises by Five

U.S. drilling activity increased for the week ending August 14, with the total rig count rising by five to 593 rigs, according to Baker Hughes. The weekly gain was driven primarily by natural gas-directed rigs, which increased by four, while oil-directed rigs rose by one. Compared to the same week last year, U.S. rig count is 10.0 percent higher, with both natural gas- and oil-directed rigs maintaining a surplus over year ago levels. Natural gas rigs are up 4.9 percent, and oil rigs are 10.4 higher than in 2025.

What to Watch:

• LNG: How might European and Asian buyers respond if storage concerns and elevated international prices intensify competition for flexible U.S. LNG cargoes?
• Storage: Will strong U.S. production and easing seasonal demand accelerate storage injections as the market moves into the fall shoulder season?
• Prices: Looking ahead, will strong production keep Henry Hub prices subdued as summer demand fades, or will the approaching winter heating season support upward movements?

For questions please contact Juan Alvarado | jalvarado@aga.org, Liz Pardue | lpardue@aga.org, or Lauren Scott | lscott@aga.org

To be added to the distribution list for this report, please notify Lucy Castaneda-Land | lcastaneda-land@aga.org

---

Notice

In issuing and making this publication available, AGA is not undertaking to render professional or other services for or on behalf of any person or entity. Nor is AGA undertaking to perform any duty owed by any person or entity to someone else. Anyone using this document should rely on his or her own independent judgment or, as appropriate, seek the advice of a competent professional in determining the exercise of reasonable care in any given circumstances. The statements in this publication are for general information and represent an unaudited compilation of statistical information that could contain coding or processing errors. AGA makes no warranties, express or implied, nor representations about the accuracy of the information in the publication or its appropriateness for any given purpose or situation. This publication shall not be construed as including advice, guidance, or recommendations to take, or not to take, any actions or decisions regarding any matter, including, without limitation, relating to investments or the purchase or sale of any securities, shares or other assets of any kind. Should you take any such action or decision; you do so at your own risk. Information on the topics covered by this publication may be available from other sources, which the user may wish to consult for additional views or information not covered by this publication

Data Disclaimer Notice: S&P Global Energy

Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party. Such party, its affiliates and suppliers (“Content Providers”) do not guarantee the accuracy, adequacy, completeness, timeliness, or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of cause, or for the result obtained from the use of such Content.  In no event shall Content Providers bed liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content.  A reference to a particular investment or security, a rating or any observation concerning an investment that is part of the Content is not a recommendation to buy, sell or hold such investment or security, does not address the suitability of an investment or security and should not be relied on as investment advice. Credit ratings are statements of opinions and are not statement of fact.

Copyright © 2026 American Gas Association. All rights reserved.Natural Gas Market Indicators – July 9, 2026