Natural Gas Update July 22,2025

Overview

Natural Gas --NG is down 7.5 cents
NG prices are down further today as the early August forecast for Gas Weighted Degree Days (GWDD) is seen reverting to the 5 year average, thus cooling down from the late July heat. Also wind generation has picked up. A slight drop in LNG feedgas volume was also seen weighing on prices, as is the small addition to the 5 year surplus expected in this week's gas storage data.

Celsius Energy says that wind generation is running at 3 times the pace seen one year ago.

"While a mid-Summer heatwave will dominate the Central US over the next 7-10 days, the near-term models suggest that the heat will peak around July 29 with forecast Gas-Weighted Degree Days (GWDDs) retreating back closer to 5-year averages for the first few days of August." (Celsius Energy)

Gas flows to Cheniere's 3.9-BCF/d Corpus Christi LNG export plant in Texas were on track to decline to 1.7 BCF/d on Monday from 2.2 BCF/d on Sunday and an average of 2.3 BCF/d over the prior seven days, according to LSEG data. (Reuters)  The company had said in a report that compressor work on a pipeline providing gas to the plant could reduce gas flows by around 0.4 BCF/d on July 24.

U.S. domestic natural gas production was estimated well above year ago levels at 108.2 BCF/d yesterday, according to Bloomberg data, and compared to the previous 30-day average of 107.4 BCF/d.

On Monday, LSEG forecast average gas demand in the Lower 48, including exports, would rise from 106.3 BCF/d this week to 110.4 BCF/d next week. The forecast for this week is down 1.1 BCF/d from that seen Friday.

Henry Hub next day cash gas was quoted Monday $3.35/$3.38--and was thus at a premium to the spot futures --an event we have not seen since April. The spot August futures were printing near 3.33--thus at a -2/-5 cent differential --down from the near +20 cent differential the futures held last Tuesday. The cash over the screen differential for the natural gas tells us a few things. One is that the market seeing the reduction in cooling demand for early August in the weekend forecast is not expecting next month/August to see the level of demand/heat that we are seeing now in July and have seen earlier in the month. Secondly, the move lower for the August futures may be about long liquidation and /or new short positions, given that money managers have pared back their net short positioning from over 84,000 contracts back on June 10 to the current net short total seen Friday of 19,525 contracts. Also the robust NG production seen is weighing on NG futures, but has not weakened the spot next day cash value given the strong demand seen in the immediate it seems.

On the CME block board on Monday, there was an October January NG call spread butterfly that traded. The -$1.00 and -$0.50 call strikes were bought 1,250 times each against selling 2,500 contracts of the -$0.75 call for a cost of 3.0 cents to the buyer of the wings.  Also, we saw the August $3.25/$3.00 put spread trade in a 1 by 1.5 ratio with the $3.25 put buyer paying 5.3 cents while also buying a delta amount of August futures at $3.31. The August $3.25 and $3.00 puts also traded as a part of a butterfly with the $2.75 put. The $3.25 put was bought versus selling of 3 times as many $3.00 puts and buying twice the amount of $2.75 puts for a cost of 2.1 cents to the buyer of the wings. The September call option open interest rose by almost 15,000 contracts with notable increases in the $3.40, $3.75 and $4.00 strikes. One trade saw the $3.40 call having been bought against selling of the $4.00 call at a cost of 16.6 cents with delta futures sold at $3.38.

Technically NG spot futures momentum has turned negative basis the DC chart due to the steep fall in prices seen the past 2 days. Support for the spot futures lies at 3.214-3.217 and the at 3.149-3.152. Resistance is seen at 3.350-3.359 and then at 3.418-3.425.

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