Gas Market: Short-Term Stability vs. Long-Term Tension for CAPITALCOM:NATURALGAS
The natural gas market currently presents a mixed outlook as we approach Week 28. In the previous week, Summer 2025 contracts slightly exceeded their median pre-expiry levels, remaining within the ranges of historical volatility observed since 2010. Winter 2026-27 contracts, on the other hand, remained firmly above the upper limits of the 10-day pre-expiry band, indicating lingering concerns surrounding supply and weather-related risks.
Analysts anticipate price stabilization in the near term. However, the forward curve presents a contrasting narrative. While 2025 contracts with three-year delivery terms have aligned with 2023-2024 prices for similar tenors, a significant skew persists in contracts with short-term (1-2 years) and long-term (5-6 years) durations compared to 2020-2024 benchmarks. This reflects underlying structural uncertainties within the market.
Market fundamentals are showing signs of stabilization. During Week 27 (June 28 – July 3), storage injections saw a rebound to +63 billion cubic feet (BCF), pushing inventory levels above the five-year median. This recovery in injection rates from the previous week’s dip hints at the possibility of reaching peak storage levels in 2024 if current supply and demand conditions continue. However, weather and seasonal factors in the latter half of the summer present potential challenges to this trajectory.
According to NOAA data, a gradual stabilization in weather patterns is expected. While Week 28 remains hotter compared to the past 30 years, forecasts anticipate a return to the median by Week 29. The accompanying graph illustrates this trend, with candlesticks representing quantiles spanning from 1994 to 2024. Red dots signify projections for 2024, green for 2025, and blue for 2025 predictions. This stabilization pattern appears consistent across nearly all regions.
Despite these positive movements, the supply-demand balance lags behind historical norms. In Week 28, the net difference between supply and demand remains significantly lower than the median observed from 2014 to 2024. This suggests that the current short-term stability may mask deeper market imbalances.
The divergence in the forward curve underscores this tension. Although storage growth and weather normalization provide some relief, the underlying market unease about systemic risks is evident. Factors such as potential policy shifts, infrastructure issues, and long-term demand volatility contribute to this sentiment. Currently, market sentiment remains cautiously neutral, buoyed by recent storage injections yet overshadowed by unresolved signals in the market outlook.
