Key Highlights

  • US natural gas futures fell 4 percent to around $2.62 per MMBtu, their lowest level in three months.
  • Average Lower 48 production rose to 110.6 bcfd in July, matching the December 2025 monthly record.
  • Inventories stood 6.4 percent above the five-year seasonal average as of July 17.
  • LNG export feedgas demand softened to 17.2 bcfd, partly due to Freeport LNG maintenance.

Record Production Extends the Slide to a Three-Month Low

US natural gas futures fell to around $2.62 per MMBtu, down 4 percent and extending losses to their lowest level in three months, as strong production, comfortable inventory levels, and weak LNG feedgas demand continue to weigh on prices. Average gas output in the US Lower 48 states rose to 110.6 billion cubic feet per day so far in July, up from 110.0 bcfd in June and matching the monthly record high reached in December 2025.

The increase in production has added to concerns over an oversupplied market, with inventories remaining 6.4 percent above the five year seasonal average as of July 17 and expected to rise to 6.6 percent above normal for the week ending July 24. This continued inventory surplus suggests the market remains well supplied heading into the latter part of the summer, even as cooling demand typically peaks during this period.

Softer LNG Demand Adds to Oversupply Concerns

LNG export demand also softened, with gas flows to major export terminals averaging 17.2 billion cubic feet per day so far this month, down slightly from 17.4 bcfd in June, partly due to scheduled maintenance at Freeport LNG's facility in Texas. This decline in export demand removes a key demand channel that has otherwise helped absorb rising domestic production in recent periods.

Meanwhile, temperatures are forecast to remain mostly above normal through August 11, a factor that would typically support power generators' gas demand to meet cooling needs and could help offset some of the current oversupply pressure. The combination of record production, elevated inventories, and temporarily reduced LNG demand due to maintenance work suggests the current price weakness may reflect a temporary confluence of supply side factors rather than a fundamental shift in longer term demand trends, particularly once the Freeport facility resumes normal operations.

Balancing Persistent Oversupply Against Warm Weather Demand Support

Natural gas prices will likely continue to be shaped by the balance between record setting production levels and the extent to which warm weather demand and LNG export activity can absorb the resulting supply. Should the above normal temperature forecast through August 11 materialize as expected, increased power sector demand for cooling could provide some price support even against the backdrop of elevated inventories.

However, if production continues to run near record levels while the Freeport LNG facility remains under maintenance, inventories could continue building toward the upper end of their seasonal range, potentially extending the current price weakness. The resumption of full LNG export capacity once maintenance concludes will be an important factor to watch, as it could help re-establish a stronger demand channel to offset the currently elevated production levels.

Conclusion

Natural gas's decline to a three month low reflects the combined weight of record Lower 48 production, elevated storage levels, and temporarily reduced LNG export demand tied to Freeport LNG maintenance. Whether prices stabilize or extend their decline may depend on how quickly LNG export capacity is restored and whether the forecast above normal temperatures through mid-August translate into meaningfully higher power sector demand. The persistent inventory surplus above seasonal norms suggests the market retains a well supplied backdrop heading into the final weeks of summer.