Henry Hub natural gas prices fell for the third straight session as the latest EIA storage report showed injections running ahead of seasonal norms. The 82 Bcf build pushed storage levels to 2,426 Bcf, well above the 5-year average of 2,158 Bcf. This surplus has been a persistent bearish factor throughout the injection season.
Dry gas production averaged 103.2 Bcf/d last week, up 0.8 Bcf/d from the prior week and 1.5 Bcf/d above year-ago levels. The production increase was concentrated in the Permian Basin and Haynesville shale, where associated gas from oil-directed drilling continues to rise. Freeport LNG flows averaged 2.3 Bcf/d, slightly below capacity.
Weather-driven demand remains mixed. National cooling degree days (CDDs) for the week were 72, in line with the 30-year average of 70, offering no weather premium. The 8-14 day forecast shows above-normal temperatures for the Midwest and East Coast, which could increase cooling demand, but the market is focused on the storage surplus.
The sharp sell-off also reflects positioning ahead of the weekend as traders reduced risk. Open interest in NYMEX Henry Hub futures fell 1.8% on Friday. The prompt-month contract (July) is now trading at a $0.15 discount to August, a contango structure that persists due to ample storage.
The storage surplus of 12.4% above the 5-year average is a clear bearish signal for the near term. However, summer cooling demand and LNG export volumes should provide a floor. Natural gas buyers should look to fix $3.00-3.20 for Q3 with a tactical approach. If storage surplus narrows in July, prices could recover to $3.50.