NYMEX gas futures trade under $2 as August contract expires

The expiring NYMEX August gas futures contract dipped below $2 July 29, its final day of trading, marking the prompt month's lowest since early May as the outlook for summer gas prices turns increasingly bearish.

During the afternoon session, August Henry Hub futures fell to just $1.85/MMBtu on low trading volume. The soon-to-be prompt September contract, where most of the volume was focused, also came under pressure July 29, hitting an intraday low around $2, data from CME Group showed.

Earlier this summer, prompt-month gas futures traded as high as $3.13/MMBtu while prices for August topped $3.19, according to Platts assessments from S&P Global Commodity Insights. In the seven weeks since, gas prices have moved steadily lower amid concerns over mounting spot-market supply.

Gas production

Arguably, rising domestic gas production has been the primary diver behind the growing supply glut and the accompanying selloff in US gas futures.

After hitting a springtime low around 98 Bcf/d in early May, US gas production has marched steadily higher in the weeks since, recently hitting new highs at over 102 Bcf/d. July to date, domestic output has so far averaged about 101.8 Bcf/d, according to data from Commodity Insights.

In mid-June, EQT was among the first US producers to publicly acknowledge the company's decision to begin returning previously curtailed gas production to market. At the time, CEO Toby Rice said that EQT would gradually return to sales about 1 Bcf/d of curtailed output. Considering recent gains in US production, which have totaled about 3 Bcf/d, it's clear that other producers are following suit.

Milder weather

In July, sweltering heat across much of the Lower 48 states fueled an accompanying spike in US gas-fired power demand, helping to partially offset gains in domestic production. July to date, US power burn has averaged over 46 Bcf/d, hitting seasonal highs at nearly 51 Bcf/d -- just shy of earlier record set in July and August 2023, data from Commodity insights showed.

In late July, though, milder weather has left more supply available in the spot gas market, raising concern over the potential for a rebound in the still-massive US gas storage surplus. According to some early estimates, the US Energy Information Administration's upcoming US inventory report could show an injection ranging in size from 30 Bcf to as much as 45 Bcf, potentially outpacing by a wide margin the five-year average injection of 31 Bcf. As of the week ended July 19, the US gas storage surplus still stands at a brow-raising 456 Bcf, data from EIA showed.

As the summer cooling season begins winding down, preliminary weather forecasts for first-half August show power burn demand averaging just over 45 Bcf/d with single-day highs remaining below 47 Bcf/d.

With milder weather on the horizon and US gas production ticking up, many analysts have already begun adjusting upward their end-of-season gas storage predictions in another ominous sign for the US market. According to the latest Scudder Publishing Group survey of analysts, domestic inventory should end the injection season at around 3.91 Tcf -- up from a projected 3.84 Tcf as recently as late June.