August 2024 highlights
  • Henry Hub front-month prices declined to a 4-month low at the end of August.
  • Strong production growth, combined with unplanned LNG export outages have left storage levels elevated heading into shoulder season
  • Bullish weather patterns, production cuts or early LNG export start-ups may conspire to tighten balances across the rest of the year.

Bearish fundamentals weighed on Henry Hub futures across August

Henry Hub front-month prices declined to a four-month low of approximately $1.90/MMBtu at the end of August, extending a steady downward trend from the heatwave driven summer peak of ~$3.13/MMBtu.

Bearish fundamentals continue to dominate the U.S. natural gas market as dry gas production increased steadily from May through August by ~3%, despite decreasing rig counts. Unplanned outages at Freeport LNG also suppressed feed gas demand, leading to elevated underground storage levels, which sit 13% above the five-year average, according to the EIA. 

Stronger storage fill has contributed to lower winter prices since late June, with Nov-Mar contracts declining by ~13% through the end of August. However, this decline has been more pronounced on Q4 contracts compared to Q1, partially due to growing uncertainty about weather driven demand fluctuations as you move through winter. Additionally, shifting expectations on feedgas demand, influenced by the timeline of new LNG terminal commissioning, are impacting the shape of the Henry Hub curve across the next 24 months.  

While bearish factors currently dominate, a rapid commissioning period at VG’s Plaquemines facility, coupled with a sequence of September heat and La Niña-driven cold early winter weather, could potentially offset the current weakness. Particularly if gas producers opt to reduce output from current levels across the fall. 

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