Natural gas prices in the United States are dropping, with rates falling to $265 per MMBtu by Tuesday afternoon due to elevated inventory, heavy production, and minimal export demand.
Inventory for U.S. natural gas is now 6.6% higher than the five-year average with little expectation that these levels will drop until winter. News that the supply is easily meeting demand plunged prices 4% lower on Tuesday, pulling rates down to a three-month low.
Gas production increased in July, adding more LNG to already high levels and exacerbating the oversupply problem. The summer demand for natural gas is typically low, and the abundant supply is at no risk of being severely drained for now. The market should expect low rates through the end of summer and most of the fall, especially if export demand is also low.
Gas Production Is Booming
Around the United States, natural gas production plants are back in full production. In most cases, the spring and summer maintenance closures are ended, and facilities are up and running at full volume. Now, some gas companies have slowed down production levels to match diminished demand, but the overall production of natural gas throughout the U.S.A. is at a high last seen in December of last year.
Gas output now averages 110.6 bcfd, which is up from the previous month and at the highest point for 2026. The market is worried now that these rising levels will work together with high inventory to create dramatically lower prices. Demand simply cannot keep up with rising supply, and producers will have to keep their prices very low to compensate.
The last time that LNG rates in the United States were this low was back in April, but that dip did not last long. Before that, the rates only fell below $2.65 per MMBtu in late 2024. We could be seeing a historic retreat that lasts all the way through the fall and affects the usually strong winter period for the market as well.
With high temperatures, some demand is likely to remain through the summer. Power generators will need to keep operating to provide cooling for residential and commercial properties, but that demand is very limited compared to the level we see during the colder months.
Timothy St. John
Financial Writer – European & US Desks
www.fxleaders.com