US Gas Output Keeps Henry Hub Pinned Near $3 Despite Summer Demand Pull
Record Lower 48 production growth is offsetting LNG export gains, leaving NYMEX front-month gas well below the EIA's own full-year forecast average.
NYMEX Henry Hub front-month gas was trading at $3.16 per MMBtu on Thursday (2026-07-02), down 0.32% on the session, as rising domestic production continues to cap prices even as summer cooling demand and LNG exports absorb significant volume.
Lower 48 marketed natural gas production averaged 117.2 billion cubic feet per day (Bcf/d) in the first quarter of 2026, the EIA reported — a 4% increase compared with the same period in 2025. The agency forecasts full-year L48 production to rise 3% versus 2025, driven heavily by the Permian Basin, where output is expected to hit 29.2 Bcf/d this year, up 6% from 2025 levels. The Haynesville region is forecast to add a further 6%. Together, these two basins alone are adding several Bcf per day of net new supply into a market where prices are already struggling to stay above $3.3
The California market illustrates what that volume surge looks like at the regional level. Monthly average spot prices in the state fell to historic lows in the first five months of 2026. Pacific storage stood 30.9%, or 69 Bcf, above the five-year average as of the week ending May 22, 2026, according to EIA data — more than 10 percentage points above the surplus recorded in other regions. Californian gas demand itself set a record low of 4.8 Bcf/d in 2025, down 7% from the prior year, as solar generation displaced gas turbines during peak hours.6
The national inventory position reinforces the same picture. US storage held 141 Bcf more than a year ago — about 8% above last year's level — heading into the injection season in May. For a reference period in which the EIA reported a weekly storage draw of only 52 Bcf against a five-year average withdrawal of 168 Bcf, the softness of demand relative to seasonal norms is plain.1
LNG exports are doing the work of drawing down supply that domestic demand cannot. Weekly vessel departures from US terminals reached 141 Bcf in mid-May, up 26 Bcf from the prior week, even with maintenance curtailing some capacity.2 That export pull helped lift NYMEX front-month gas to $2.96 on Friday (2026-05-15), a gain of 7.4% over that week, as traders priced in stronger summer demand and tightening export schedules. But the recovery stalled well below $3.50, and the current $3.16 level reflects the market's skepticism that demand growth can outrun the supply machine.
The EIA forecasts Henry Hub to average just under $3.50 per MMBtu for 2026, while Morgan Stanley has suggested prices could surge toward $5 if demand outpaces supply growth.4 The gap between those projections captures the market's uncertainty. For the surge scenario to materialise, the Permian and Haynesville ramp would need to disappoint, LNG export demand would need to accelerate further, and summer heat would need to run persistently above normal across the South Central region.
The long side has been costly. The ProShares Ultra Bloomberg Natural Gas ETF has fallen roughly 43% year to date and about 80% over the past year, as repeated attempts to price in weather or export-driven rallies have been overwhelmed by the volume of new supply.5
The inflection to watch heading into the second half is how quickly Haynesville producers respond to the $3.00-plus price signal that has re-emerged. If drilling activity accelerates, the production ceiling drops further. The EIA is already pencilling in 6% Haynesville growth for 2026 and 8% for 2027, while Permian associated gas is projected to grow 10% next year. A meaningful shift in the weekly storage trajectory — sustained by a heat anomaly rather than a single week of draw — is what the market needs to take the $5 scenario seriously.3