US Natural Gas Prices Fall on Higher Output, Reduced Exports

U.S. natural gas futures for August delivery (NGQ26) on the New York Mercantile Exchange (NYMEX) settled down 1.46% on Monday, closing at $2.897/MMBtu and marking a two-month low. This decline was primarily driven by persistent signs of strong U.S. natural gas production and weakened liquefied natural gas (LNG) export activity.

Natural gas prices extended their losing streak to a fourth consecutive session on Monday. The previous week, August futures had already dropped 25.6 cents, closing Friday at $2.940, which was the first prompt month settlement below $3.00 since May 26. U.S. dry gas output surpassed 111 billion cubic feet per day (Bcf/d) for the fourth straight day on Monday, reinforcing an oversupply narrative in the market. Notably, natural gas production in the Permian Basin continues its robust growth, hovering around 25 Bcf/d, thereby contributing significantly to the downward pressure on prices.

On the export front, LNG feedgas flows plunged to 17.14 Bcf/d on Monday, July 13, 2026, down from 18.07 Bcf/d on Sunday. According to a report by Industrial Info Resources, deliveries to the Freeport LNG facility in Texas dropped to about half of its 2.37 Bcf/d capacity due to ongoing maintenance, bringing total U.S. feed gas to 16.6 Bcf for Monday, the lowest level so far in July. The decrease in export demand following the reopening of the Strait of Hormuz has also contributed to lower flows in July. This situation, despite global supply disruptions, has exacerbated the accumulation of natural gas within the U.S. domestic market.

The price decline reflects a broader bearish sentiment in the markets, supported by U.S. Energy Information Administration (EIA) data indicating that U.S. natural gas inventories were 6.6% above their five-year average as of July 3. At the end of June, U.S. working natural gas inventories also stood 6% above the five-year average. The EIA forecasts that inventories will reach 3,966 Bcf by the end of October, maintaining a 5% surplus over the five-year average. Strong production is expected to help meet rising demand, keeping storage levels healthy and limiting upward price pressures.

The global natural gas market presents a more complex picture. The de facto closure of the Strait of Hormuz in early 2026 severely disrupted Qatari exports, which account for approximately 20% of global LNG supply, leading to significant price volatility. Although an interim agreement between the U.S. and Iran in mid-June aimed to provide a framework for reopening the strait, volumes remain a fraction of pre-conflict levels. Rabobank has revised its TTF Natural Gas and JKM forecasts higher for Q3 and Q4 2026, citing a structurally tight global LNG market and deeper Qatari export losses. This suggests that despite current domestic oversupply in the U.S., global market tightness could provide some underlying support for prices in the medium term.

Analysts and market expectations suggest that U.S. natural gas prices may continue to face downward pressure in the short term due to prevailing supply dynamics. The EIA anticipates Henry Hub spot prices to average around $3.70/MMBtu in 2026 before declining below $3.50/MMBtu next year. High domestic production and fluctuating LNG exports will continue to shape prices. However, increasing electricity demand driven by AI data centers and electrification is expected to bolster natural gas consumption. These factors may help the market find equilibrium in the long run, while short-term weather forecasts and developments in export flows will sustain price volatility.