A Calm Summer Market

The summer domestic natural gas marketplace has stayed relatively calm since the last update three months ago. Considerable attention has been focused on storage levels going into fall, along with discussion about the possibility of reaching the highest storage volume recorded going into a winter in the Lower 48. 

Production and Demand Continue to Rise

Production has remained strong through 2026, with marketed production projected to average 122.5 Bcf per day by the end of the year. This level is above the record of 118.5 Bcf per day set in 2025. Continued strong production will be needed to reach this projection, and mild temperatures will most likely help support that outcome. 

Demand has also continued its trend of reaching new highs. The increase is being driven by persistent cooling demand for power generation throughout the summer, booming data center demand, and weekly record-setting LNG feedgas demand. Domestic data center demand is expected to outpace the total annual demand of Germany and Japan combined by the early 2030s. With the United States serving as the largest supplier of LNG to the global market, domestic production will need to accelerate significantly to keep pace. 

Storage and LNG Feedgas

Domestic natural gas storage is currently sitting at 3,298 Bcf of working gas. As of September 11, storage volumes were 3.6% below levels at the same time last year and 3.8% above the five-year average. LNG feedgas demand averaged 18.9 Bcf per day for the week ending September 13. LNG feedgas demand is expected to increase by 2 to 4 Bcf per day in 2027, followed by a further increase in 2028. 

El Niño and Regional Market Impacts

There has also been considerable news regarding El Niño, including the possibility of a “super El Niño.” With winter quickly approaching, the effects of El Niño on regional marketplaces will vary depending on the marginal generation fuel or resource type. Historically, Canada and the northern United States experience milder winter temperatures during El Niño. Heating demand for natural gas declines, which mainly affects spot pricing at regional hubs. 

One important consideration is that a mild winter may also mean less snowfall. In that scenario, hydroelectric generation could be significantly reduced, pushing natural gas demand higher to address generation gaps. This dynamic may be reflected in futures markets. Spot pricing may decline in winter-over-winter comparisons, while forward pricing may not fall at the same pace because of the difference in generation asset demand. 

Looking Ahead to Summer 2027

An increase in heat waves, along with volatile storm and weather patterns, may occur going into summer 2027 and could place upward pressure on the natural gas futures market. While El Niño may provide a short-term benefit for regional spot-price hubs, forward markets may continue to experience volatile trading. Futures have not declined in response to El Niño speculation as of yet, and the 12-month strip remains elevated, with winter basis pricing also holding at an elevated level.