• Natural Gas Market Indicators

Natural Gas Market Summary

As summer enters its final stretch, the U.S. natural gas market remains well supplied despite higher year-over-year demand trends. According to preliminary data from Rystad Energy, total natural gas demand, including exports, of more than 118 Bcf per day through July is running 2.5 percent above the same period in 2025. Growth has been driven by LNG feedgas deliveries and higher power sector consumption despite flagging industrial and residential/commercial demand signals. On the supply side, dry gas production for the year so far has averaged 111.1 Bcf per day, 4.3 percent higher than year-ago levels, and underground storage inventories remain nearly 7 percent above the five-year average.

Looking ahead, 2026 average annual daily production is expected to rise 4.7 percent over 2025 levels, according to recent forecasts from Rystad Energy. Despite an expected increase in total natural gas demand of nearly 3 percent year over year, Rystad Energy lowered its price forecast in the July North America Gas Market Report (July Market Report). The current forecast now expects Henry Hub prices to average $3.31 per MMBtu in 2026, down 6.2 percent from the June forecast, on a looser market and bearish market fundamentals.

Natural Gas Prices Remain Below the $3 Mark

Natural gas prices declined in July amid record production and softer LNG feedgas demand. Henry Hub futures prices fell nearly 15 percent for the month, from $3.22 per MMBtu on July 1 to $2.75 per MMBtu on July 31. In the day-ahead spot market, Henry Hub prices followed a similar trend, declining 22.7 percent from $3.35 per MMBtu on July 1 to $2.59 per MMBtu on July 31, according to data from Argus Media.

Average day-ahead spot prices fell to discounted levels in most regions relative to Henry Hub during July as regional supply and demand dynamics influenced local pricing (all in $/MMBtu):

• Northeast: The regional average moved from a $0.92 premium to Henry Hub at the beginning of July to a $0.22 discount by the end of the month.
• Appalachia: The regional discount spread widened slightly, from $0.75 below Henry Hub on July 1 to $0.83 below the benchmark on July 31.
• Southwest and Rockies/Northwest: Steep discounts narrowed substantially over the month. Both regional averages traded more than $2.35 below Henry Hub on July 1 but only about $0.20 below the benchmark by July 31.
• Louisiana/Southeast: The regional average remained closely aligned with Henry Hub, ending July at a modest $0.04 premium.

Most regional indexes averaged below Henry Hub during July. Regional average price differentials ranged from nearly flat in Louisiana/Southeast and the Northeast, to discounts greater than $0.70 per MMBtu in the Rockies/Northwest, Southwest, and Appalachia.

Both spot prices and futures at Henry Hub have remained below $3 in August to date, reinforcing recent bearish trends. As of August 5, prices settled at $2.69 per MMBtu in the day-ahead spot market and $2.60 per MMBtu in the futures market.

Summer Heat Expected to Rebound After Brief Cooldown

The U.S. experienced a two-week decline in temperatures through the end of July, even as conditions remained above the 30-year normal. For the week ending August 1, temperatures were 6.7 percent cooler than the same week last year but 10.7 percent warmer than the 30-year normal, according to cooling degree days (CDDs) weighted by electric home air conditioning customers. Regionally, CDD data were mixed, with four regions – the West North Central, West South Central, Mountain, and Pacific – running warmer than last year. All but three regions – the Middle Atlantic, East North Central, and New England – were warmer than normal. Despite the late-month moderation, July finished 1.1 percent warmer than last year and 18.4 percent warmer than normal.

The National Oceanic and Atmospheric Administration’s (NOAA) 8–14-day temperature outlook for August 13–19 favors above-normal temperatures across much of the continental U.S., Alaska, and Hawaii. The highest probabilities are expected across the South and Midwest, where chances exceed 60 percent in portions of the Gulf Coast states, Oklahoma, and Arkansas. Near- and below-normal temperatures are favored across the Northeast and portions of the northern tier. At the time of writing, NOAA’s National Hurricane Center is monitoring two disturbances in the Pacific, each with a less than 40 percent chance of cyclone formation in the next seven days. No tropical cyclone activity is expected in the next seven days in the Atlantic.

Electric Power Demand Reaches Record in July

Total natural gas demand, including exports, averaged 113.8 Bcf per day in July, rising 2.8 percent above the previous record for the month set in July 2025, according to preliminary data from Rystad Energy. Growth was driven primarily by higher export demand, with LNG feedgas and pipeline exports to Mexico increasing 7.8 percent year-over-year. Domestic demand also increased, supported by record electric power consumption and higher industrial natural gas demand. Preliminary data from Rystad shows that electric power demand averaged 49.6 Bcf per day in July, which would be a new monthly record for the sector, while industrial consumption rose 3.2 percent year-over-year. Residential and commercial demand declined year-over-year, averaging 3.3 Bcf per day in July.

Month-over-month trends were more mixed. LNG exports averaged 15.8 Bcf per day in July, declining 1.2 percent from June due to the ongoing Freeport LNG outage and slower-than-expected Golden Pass LNG ramp-up. However, total export demand still increased 2.0 percent month-over-month, supported by a 10.4 percent increase in pipeline exports to Mexico amid strong cooling demand.

Production Strength Driven by LNG and Data Center Demand

Dry natural gas production averaged 112.2 Bcf per day in July, up 3.9 percent from July 2025 and marking a record high for the month, according to preliminary data from Rystad Energy. In its July Market Report, Rystad revised its forecast for 2026 exit-to-exit production growth to 2.8 Bcf per day, meaning production at year-end 2026 is expected to be 2.8 Bcf per day higher than at year-end 2025. This is up from the 2.4 Bcf per day increase projected in its June forecast. Production growth has been concentrated in the Haynesville Basin, where the company Citadel-backed Apex has accounted for more than 800 MMcf per day of growth so far in 2026. Looking ahead, Rystad expects exit-to-exit production growth to accelerate to 5.0 Bcf per day in 2027, supported by stronger LNG capacity additions and rising natural gas demand from AI data centers.

July Feedgas Flows Ease Despite Rallying Global Prices

In July, LNG feedgas flows averaged 17.4 Bcf per day, declining 1.2 percent from June and remaining below early-year highs of nearly 19 Bcf per day, according to preliminary data from Rystad Energy. Rystad Energy’s July Market Report attributed the decline to another maintenance period at Freeport LNG, which began in early July and is expected to continue through the end of August. Flows have averaged approximately 0.7 Bcf per day below normal intake levels during the outage. Feedgas intake at Golden Pass LNG also remained below expected levels as the facility’s ramp-up progressed more slowly than anticipated. The combination of reduced LNG feedgas demand has contributed to additional supply availability in the domestic market, supporting downward pressure on natural gas prices.

According to Reuters, the July slowdown in U.S. LNG exports coincided with higher global natural gas prices. Preliminary data from financial firm LSEG indicate that exports declined by 0.1 million metric tons (MMT), from 10.6 MMT in June to 10.5 MMT in July.  Over the same period, prices increased at key Asian and European trading hubs. Asia’s benchmark Japan Korea Marker averaged $19.10 per MMBtu in July, increasing 10.2 percent from June, while Europe’s Dutch Title Transfer Facility averaged $18.07 per MMBtu, up 37.0 percent from the June average. Europe remained the primary destination for U.S. LNG cargoes as buyers continued to replenish storage inventories ahead of the winter heating season. U.S. LNG shipments to Europe increased to 4.8 million metric tons (MMT) in July from 4.4 MMT in June, accounting for nearly half of total U.S. LNG exports.

In other LNG news:

• Mexico’s second LNG terminal, Energia Costa Azul, shipped its first cargo from Phase 1 of the project on July 8, according to the Energy Information Administration (EIA).
• LNG Canada reached a record level of natural gas intake in June.

Storage

The EIA reported a 33 Bcf net injection into underground storage for the week ending July 31, bringing lower 48 natural gas inventories to 3,117 Bcf. The weekly refill was driven by net injections of 24 Bcf and 20 Bcf in the East and Midwest, respectively, while other regions posted net withdrawals of up to 6 Bcf in the South Central. Working gas stocks now sit 6.7 percent above the five-year average but 0.4 percent below year-ago levels. Regional storage inventories remain in surplus territory relative to their respective five-year averages, while only the East and Midwest remain above year-ago levels.

After adjusting for weather, July storage injections averaged 1.2 Bcf per day higher than normal, according to Rystad Energy’s July Market Report.

The Value of Natural Gas Trade with Canada Increased in 2025

Cross-border pipeline flows showed mixed trends for the week ending August 5, according to preliminary data from Rystad Energy. Compared to last week, imports from Canada and exports to Mexico decreased, falling 2.1 percent and 5.0 percent, respectively. On a year-over-year basis, imports to Canada decreased by 8.1 percent while exports to Mexico rose 7.9 percent on higher cooling demand.

The EIA reports that the value of natural gas trade with Canada increased in 2025, as natural gas prices increased from 2024 all-time lows on an inflation adjusted basis. U.S. natural gas exports to Canada, made up primarily of pipeline exports, averaged 2.8 Bcf per day, up 4 percent year over year, and increased 77 percent in value to $2.6 billion. At the same time U.S. imports from Canada averaged 8.6 Bcf per day in 2025, 1 percent above 2024 levels, while the value of those imports increased by 52 percent.

Oil-Directed Drilling Increases Week-over-Week

U.S. drilling rig count increased by one for the week ending July 31, bringing the total count to 588, according to data from Baker Hughes. This increase was driven by oil-directed rigs, rising by one to 451, while natural gas-directed rigs and miscellaneous rigs remained unchanged at 127 and ten, respectively. Total U.S. rigs are up 48 from the same week last year, an increase of 8.9 percent. Natural gas-directed rigs increased by three for this period, a 2.4 percent increase, with oil rigs up 41, a 10 percent increase.

What to Watch:

• Demand: How strongly will the expected rebound in August heat translate into power-sector gas demand after July’s record consumption?
• Price: Are July’s shifting regional price differentials temporary, or do persistent discounts in Appalachia, the Southwest, and the Rockies/Northwest point to ongoing transportation constraints or localized supply abundance?
• Production: Will strong production forecasts materialize if Henry Hub prices remain below $3 per MMBtu?

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

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