Fundamentally speaking, natural gas is setting up for low prices to continue

Forecasts are not the same as predictions. Forecasts are more data driven, objective in nature and involve historical data analysis with some logical impact of current conditions and the probability of future events.  Predictions can include some of these same characteristics but are less data driven, more subjective, and include a component of opinion, intuition and guessing.  In energy, a forecast of the future price is driven by fundamentals, or observable, tangible data points.  As the days continue to get shorter and the dog days of summer heat slowly drift into the past, fundamentals take the forefront as data point drivers become more transparent and the timeline to winter becomes shorter.   

Natural gas storage levels are one of the best fundamental indicators of the overall supply demand balance.  Too much demand growth without a corresponding increase in production, and we see storage levels trending down compared to historical levels and prices tend to rise.  Too much supply to meet the demand and we see the opposite occur, storage levels bulge and prices fall.  We are currently in the latter situation.     

The chart below shows a history of natural gas storage levels from January 2021 to August 2026 and a forecast by month through October 2027 based on data from the EIA Short Term Energy Outlook in August 2026, which indicates that storage will likely be 3,985 Bcf at the end of October, which would be a record.   

As stated above, a forecast isn’t a prediction, but it is based on data points, or fundamentals that would indicate it is believable.  Those supporting fundamentals include the following: 

LNG export feedgas demand has weakened in August due to maintenance at Freeport LNG and Corpus Christie and Golden Pass continues to make slower than expected progress towards commissioning with exports still limited to operating capacity not profit netbacks which is 2 Bcf per day off peaks set in April.    

Production of natural gas remains strong, hitting a record in mid-August of just over 115 Bcf per day per Bloomberg. 

Significant growth in solar generation so far this year has increased its share of overall power generation to 10.3%, up from 6.4% in 2024, even as overall generation demand has grown, allowing larger storage refills of natural gas this summer. 

While also just a forecast, El-Nino weather patterns this year from NOAA indicate another bearish impact on gas demand for the upcoming winter with warmer than normal temperatures anticipated to be 5% below the 10-year average.  

 All of these are pointing towards continuing the current low-price environment for natural gas over the next couple of months as we head into winter with the current NYMEX winter strip pricing currently trading near two-year lows at $3.368/MMBtu and $1.20 below last winter NYMEX average of $4.58 (Nov ’25- Mar ’26).  So why would a buyer take protective action when things look so good fundamentally?  The only thing guaranteed about a forecast is that it will change.  If you don’t like the idea of a constantly changing forecast and the caveats that come with it, put some protection in place to take advantage of current fundamentals and the year-over-year cost reduction before they change.  

(Since this article was written on August 25, late summer heat has arrived across major portions of the country, increasing power demand pulls for natural gas.  While the EIA has not yet come out with another Short-Term Energy Outlook, the impact to storage forecasts will likely keep end of season totals at a deficit to last year and the upcoming winter strip has increased $0.10/MMBtu and is currently trading at $3.46 (intraday 9/3/26).  This serves as an example of why forecasts, particularly storage, can constantly change due to another fundamental driver, weather).