EIA Lifts Henry Hub Forecasts but Front-Month Falls to $2.91 on Mild Weather
With U.S. gas inventories 6% above the five-year average and milder-than-expected weather, near-term fundamentals are pulling prices well below the EIA's 2026 outlook.
NYMEX Henry Hub front-month dropped to $2.91 per million British thermal units on Friday (2026-07-24), shedding 1.36% on the session, even as the U.S. Energy Information Administration raised its Henry Hub price projections for both 2026 and 2027 in its July short-term energy outlook released earlier this month.4
The gap reflects how heavily near-term supply and weather conditions are weighing on the market. The EIA put its 2026 Henry Hub average at just under $3.50 per MMBtu, roughly 20% above where the front-month is trading on Friday (2026-07-24). That is a wide spread for a forecast month already half over. EBW Analytics Group analyst Eli Rubin, in a report sent to Rigzone on Tuesday (2026-07-14), identified milder weather as the primary factor undermining near-term fundamentals.4,1
Working natural gas inventories ended June (2026-06-30) at 6% above the five-year average, the EIA's July STEO noted. The agency forecasts that surplus extending through injection season, with inventories projected to reach 3,966 billion cubic feet by the end of October (2026-10-31). That would leave winter beginning from a position of notable supply cushion.4
Mild temperatures have kept cooling demand from accelerating the draw on those stocks. Sellers face little pressure to back away. Until a heat shock or unexpected demand event materialises, the storage surplus limits any sustained upside for the front month.4
The longer-term picture looks different. Wood Mackenzie warned on July 8 (2026-07-08) that the era of cheap Henry Hub gas is drawing to a close. U.S. supply growth over the past decade was underpinned by molecules produced at near-zero marginal cost, but that share of total supply is expected to fall below 20% over the next ten years. With supply less responsive to price signals than it once was, Wood Mackenzie argued, prices will need to settle structurally higher to attract new production.3
Henry Hub, Wood Mackenzie added, remains a localised benchmark shaped by supply, demand, and infrastructure conditions specific to southern Louisiana — not a direct reflection of global LNG market tightness. Atlantic LNG arbitrage can transmit tightness from European or Asian markets to Henry Hub prices, but only when the spread between overseas hub prices and the cost of liquefaction and freight is wide enough to redirect cargoes, not automatically.3
Morgan Stanley put a $5 per MMBtu price target on Henry Hub for 2026, well above the EIA's own raised forecast and roughly 72% above where the front-month is trading today (2026-07-24). Production expected to grow about 1% this year to nearly 109 billion cubic feet per day supplies a buffer that makes the bull case harder to build from current inventory levels.1
Hedging activity has expanded sharply. ICE North American natural gas futures and options hit a record open interest of 41.4 million contracts on May 22 (2026-05-22), up 11% year-on-year, with ICE Henry Hub futures specifically up 13% year-on-year on the same day. ICE's U.S. Financial Gas futures and options, spanning 70 distinct North American hubs, added 8% year-on-year. The breadth of that positioning increase suggests participants are preparing for a wider distribution of outcomes than a year ago.2
Consensus signals across 18 indicators lean bullish with a 39% strength reading. Downstream, a sustained Henry Hub move higher would feed through to ERCOT gas generation costs and power prices in ISO-NE and PJM. But that chain requires demand to firm meaningfully against an injection season running 6% above the five-year average.
The clearest signal through August (2026-08) is the pace of weekly storage injections. If builds slow enough to close the gap with the five-year average, the EIA's raised forecast becomes more credible as a near-term guide. If mild weather holds and the surplus widens, the structural case Wood Mackenzie outlines stays a medium-term story with limited traction at the front of the curve.4,3