SEATTLE (Oil Monster): In its latest short term energy outlook (STEO), which was released this month, the U.S. Energy Information Administration (EIA) lowered its average Henry Hub spot price projections for both 2026 and 2027.
According to its new STEO, the EIA now sees the Henry Hub spot price averaging $3.44 per million British thermal units (MMBtu) in 2026 and $3.31 per MMBtu in 2027. In its previous STEO, which was released in July, the EIA projected that the Henry Hub spot price would come in at $3.67 per MMBtu this year and $3.49 per MMBtu next year.
A quarterly breakdown included in the EIA’s August STEO showed that the EIA sees the Henry Hub spot price averaging $2.87 per MMBtu in the third quarter of this year, $3.14 per MMBtu in the fourth quarter, $3.62 per MMBtu in the first quarter of next year, $2.79 per MMBtu in the second quarter, $3.20 per MMBtu in the third quarter, and $3.63 per MMBtu in the fourth quarter.
In its previous STEO, the EIA forecast that the Henry Hub spot price would average $3.37 per MMBtu in the third quarter of 2026, $3.57 per MMBtu in the fourth quarter, $3.83 per MMBtu in the first quarter of 2027, $2.99 per MMBtu in the second quarter, $3.36 per MMBtu in the third quarter, and $3.78 per MMBtu in the fourth quarter of next year.
Both STEOs showed that the Henry Hub spot price came in at $3.53 per MMBtu in 2025.
“We expect the Henry Hub spot price to average $2.87 per million British thermal units, in 3Q26, down 50 cents compared with last month’s forecast,” the EIA highlighted in its August STEO.
“Our lower price forecast reflects reduced LNG feedgas demand and record natural gas production, which we expect will leave natural gas inventories at their highest level heading into winter since 2016,” the EIA added.
“We expect Henry Hub prices to rise gradually in the coming months but remain relatively low because inventories are well above the five-year average. Futures prices show a similar pattern, with contracts through September 2026 remaining below $3.00 per MMBtu,” it continued.
The EIA highlighted in its August STEO that, in its forecast, it expects natural gas inventories to be “a record 3,985 billion cubic feet” at the end of October this year, which it highlighted is an increase of 19 billion cubic feet compared with the July STEO and five percent above the five-year average.
“With high storage heading into winter, we expect the Henry Hub spot price will remain below $3.00 per MMBtu until November and average $3.03 per MMBtu over the remaining five months of the year, nearly 50 cents per MMBtu lower than last month’s forecast,” the EIA said in its latest STEO.
Production, Weather Sinks NatGas
In an EBW Analytics Group report sent to Rigzone on Monday, Eli Rubin, an energy analyst at the company, outlined that “record daily production” and “softening weather” would “sink natural gas”.
“The September natural gas contract rose on Friday but remained almost 10 cents off Wednesday’s high as early-week momentum began to slide,” Rubin noted in the report, which highlighted that the September natural gas contract closed at $2.733 per MMBtu on Friday. This was up 0.6 cents, or 0.2 percent, from Thursday’s close, the report outlined.
“Over the weekend, booming production nominations, milder weather, and bearish technicals threatened a retest of support near $2.62 per MMBtu or lower,” Rubin warned in the report.
“Early-cycle LNG feedgas demand nominations are climbing to a six-week high this morning [Monday] on record inflows to Corpus Christi as Train 7 pushes higher and signs of a recovery at Freeport,” he added.
“While buried under production and weather headlines, strengthening LNG demand - if sustained - may help natural gas find support,” he continued.
Rubin went on to note in the report that “the new production high comes as natural gas storage is 198 billion cubic feet above the five-year average and summer ends early in the Midwest and Northeast”.
“Higher supply over the next few weeks and cooler weather may mark a seasonal low for NYMEX gas futures before they recover in the autumn,” he said.
The EIA’s latest weekly natural gas storage report, which was released on August 13 and included data for the week ending August 7, outlined that working gas in storage was 3,153 billion cubic feet as of August 7, according to the EIA’s estimates.
“This represents a net increase of 36 billion cubic feet from the previous week,” the EIA highlighted in that report.
“Stocks were 25 billion cubic feet less than last year at this time and 198 billion cubic feet above the five-year average of 2,955 billion cubic feet,” it added.
“At 3,153 billion cubic feet, total working gas is within the five-year historical range,” it continued.
Short Term Support, Long Term Very Bearish
In a separate EBW report sent to Rigzone on Tuesday, Rubin noted that “enduring” Texas heat was offering short-term support for gas.
“The NYMEX front-month tested as low as $2.638 yesterday [Monday] before recovering,” Rubin said in the report.
“Modestly hotter forecasts from some meteorologists are supporting the September contract this morning [Tuesday]. Despite an early end to summer in the Midwest and Northeast, Texas is still extremely hot with peak loads possible by Friday,” he added.
In the report, Rubin noted that, “while heat may offer short-term support”, higher natural gas production had risen 10 billion cubic feet per week over the past seven days and added that daily LNG demand was down on Tuesday morning.
He went on to warn that the long-term outlook for natural gas is “very bearish amid surging production, storage likely to top 3.9 trillion cubic feet, and record el Niño strength posing risks for a very mild winter”.
“Still, South Central storage deficits, rising Gulf Coast LNG, late-summer regional heat, and a building year-over-year storage deficit into early September imply a medium-term relief rally,” he added.
This EWB report highlighted that the September natural gas contract closed at $2.69 per MMBtu on Monday. This was down 4.3 cents, or 1.6 percent, from Friday’s close, the report outlined.
Courtesy: www.rigzone.com
