Natural gas futures slide 2.4% to $2.939 on glut, Freeport work

U.S. natural gas futures extended their decline Thursday, with August delivery falling 2.4% to $2.939/mmBtu as a bigger-than-expected storage build and planned maintenance at Freeport LNG weighed on prices.

"Technically August natural gas has moved to a bearish structure making new contract lows this morning," Dennis Kissler, senior vice president at BOK Financial, said in a note. Weather models turned cooler while still warmer than normal, though with storage elevated most traders are keeping a "sell the rallies" attitude, he added.

The decline follows Wednesday's inventory report from the Energy Information Administration, which showed a larger-than-expected build that pushed storage levels to 6.6% above the five-year average. The surplus has eroded the price support that typically emerges during summer cooling season, when power generators burn more gas for air conditioning.

The combination of ample supply and reduced export demand from Freeport LNG's planned maintenance threatens to keep prices under pressure through late July. If weather forecasts continue to moderate, August contracts could test support below $2.80/mmBtu, a level not seen since early spring.

The selloff marks a sharp reversal from June, when natural gas prices briefly touched $3.50/mmBtu on expectations that record heat would drain storage. Those gains have fully evaporated as actual cooling demand fell short of forecasts and production held steady near 102 Bcf/d, according to S&P Global Commodity Insights data.

Freeport LNG's maintenance outage removes a key outlet for domestic gas supply at a time when the market can least afford it. The Texas export facility, which can process about 2.1 Bcf/d of natural gas, typically provides a critical demand buffer during the summer months. Any extension of the planned maintenance would compound the bearish pressure.

The broader macro backdrop offers little relief. Mild industrial demand and a strong dollar have dampened the export arbitrage for U.S. LNG cargoes to Europe and Asia, where storage levels are also well above seasonal norms. The combination of domestic and international headwinds has left the gas market searching for a floor.

The last time storage exceeded the five-year average by a similar margin was in March 2024, when Henry Hub prices fell below $1.60/mmBtu before a production response eventually rebalanced the market. Current production levels near 102 Bcf/d suggest a similar supply-side adjustment may be needed before prices can stabilize.

This article is for informational purposes only and does not constitute investment advice.