Yesterday’s news of a Force Majeure declaration by TCO helped fuel a short-covering rally that saw the largest daily price movement since January for the prompt-month contract. Market participants appeared to consider yesterday’s movement an overreaction based on today’s price action, with futures sliding throughout most of the trading day with no major change in the underlying fundamentals.

At this point in the year, temperature forecasts will likely have a limited impact on pricing as both cooling and heating demand near their seasonal nadir. Within the next two to three weeks, however, temperature forecast maps that maintain similar anomalies to those below should have a decidedly bearish impact on pricing as warmer temperatures delay the onset of the heating season.

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The rally was supported by a combination of tightening storage trends and an unexpected pipeline disruption. This morning’s 53-Bcf storage build came in below historical norms for a sixth consecutive week, further widening the year-over-year inventory deficit and shrinking the surplus to the five-year average. Adding fuel to the move, TCO declared force majeure following a mechanical issue on its Mountaineer XPress system in West Virginia, effectively stranding 1.8 Bcf per day of Appalachian production from the broader market. The outage could last as long as a month, which would tighten balances just as weather-related demand is finally starting to subside.

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The question now is whether the move above $3.00 can develop into a more sustained breakout or proves to be another short-lived test of the psychologically important level. Lingering late-season heat, smaller-than-normal storage injections, and continued strength in LNG demand have provided support, but the broader market still faces record production and a seasonally weakening demand backdrop. With the prompt month now trading at its strongest level in more than two months, the next several sessions should provide a better indication of whether buyers are willing to continue to push the market higher.

Tomorrow’s EIA storage report will provide the next fundamental test for the rally. The Wall Street Journal survey is centered on a 53-Bcf injection, well below the five-year average build of 76 Bcf. A build in line with expectations would mark a sixth consecutive below-normal injection and trim the surplus to the five-year average to just 95 Bcf, continuing the steady erosion that has helped support prices in recent weeks.

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Today marked the strongest single-day increase for prompt-month natural gas since May and muddies the waters of what has otherwise been a calm market with a bearish bias. Absent any specific fundamental catalyst, the price action could be at least partially attributed to short covering against the backdrop of an outsized speculative short position, according to the Commitments of Traders report. There were also some reports of Northeast production shut-ins in response to depressed cash prices in the region, but that shouldn’t be considered a major price driver beyond the immediate term.

Temperature patterns remain mostly unsupportive, and despite a stretch of relatively small storage builds, inventories are set to enter the winter at healthy levels. Price action over the coming days will be telling as to whether today’s move has staying power and leads to a breakout or simply represents loud noise within the current trading range.

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Support for nearby futures appears to be fading as most of the nation reverts to a more seasonal weather pattern. Benchmark futures lingered near $3.00 per MMBtu for much of last week but never seriously tested resistance. Today’s price action suggests that market sentiment may be turning more bearish.

While a slight warmer-than-normal bias is expected to persist into early October, the anomalies are not nearly as extreme as those observed in recent weeks. Instead, temperatures are poised to come in near neutral for energy needs, limiting lingering cooling demand while also preventing the onset of material early-season heating load.

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Fundamentally, the market continues to balance lingering late-season heat against otherwise tame conditions. Forecasts remain warmer than normal across much of the country, helping sustain power-sector demand and limit storage injections, but temperatures are still trending lower on a seasonal basis. That backdrop has kept the front of the curve supported while doing little to reverse the broader weakness in winter pricing and beyond.

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This morning’s storage report continued a recent trend of improving injections with a 44-Bcf build, but inventories are still losing ground to historical benchmarks. Builds have increased in recent weeks, though they remain lighter than normal for this time of year, steadily eroding the storage cushion built earlier in the summer. That tightening backdrop is helping provide some underlying support to the market even as generation demand begins to ease.

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The fundamental landscape hasn’t changed much. Warmer-than-normal temperatures are helping to keep power burn propped up, while record domestic production continues to keep the market in balance. LNG exports remain near 19 Bcf per day and are poised to show another leg of growth before the end of the year.

Tomorrow’s storage report is expected to show another relatively small build, with the Wall Street Journal’s survey showing consensus expectations for a 49-Bcf injection. This would cut the surplus to the five-year average by 25 Bcf while adding nearly 40 Bcf to the deficit versus year-ago levels. The year-ago build was especially robust, as most of the country was experiencing very mild temperatures at this point in 2025.

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Weather forecasts have trended hotter since last week, with a persistent warmer-than-normal bias continuing to provide support for natural gas demand across much of the country. Temperatures are still expected to trend lower overall as the calendar moves deeper into September, but the warmer forecast shift could slow the seasonal decline in power generation demand and temper the pace at which storage injections strengthen.

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Temperature forecasts trended hotter over the weekend, adding significant population-weighted cooling degree days for the upcoming week. While anomalous heat during the second half of September is not nearly as impactful on energy needs across most of the country as what was observed earlier in the month, current outlooks are conducive to elevated power burn lingering late into the month. This will further stunt growth in storage inventories, likely taking 4.0 Tcf firmly off the table and reducing the odds of surpassing 3.9 Tcf prior to winter.

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Despite the late-session recoveries, nearby pricing remains under pressure following this week’s sharp decline. October is down $0.14 from last Friday, while Winter 2026-27 has lost $0.05. For now, the ability to hold the recent lows has slowed the downside momentum, but the prompt month remains firmly below the $3.00 level that capped last week’s rally. With weather-related demand expected to slide over the coming weeks and domestic production holding near record levels, near-term fundamental market support will likely continue to dwindle.

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Today’s natural gas storage report showed a larger-than-expected build into underground inventories, with the reported 40 Bcf addition exceeding the average expectation of 28 Bcf as reported by the Wall Street Journal’s survey. When adjusting for weather, today’s storage build registered as the loosest since the week ending July 10 suggesting the heat-induced tightening of the supply/demand balance may be easing.

Looking ahead, weather will likely play a reduced role as a price driver as September progresses and temperatures moderate. That is, until the market begins to look ahead to winter and the potential for residential and commercial heating demand.

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Temperature patterns are set to normalize considerably from here. Beyond today, population-weighted cooling degree days fall off and are poised to trend lower into the shoulder season.

While natural gas demand from the power generation sector has remained elevated in recent weeks, volumes should ease through the balance of September. On the other side of the coin, LNG feedgas has continued to edge higher, with estimated volumes approaching 20 Bcf per day. With Golden Pass and Corpus Christi Stage 3 now operational, the stage is set for new all-time highs in LNG export demand this fall.

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Near-term weather support continues to fade as the recent stretch of widespread heat begins to ease, reducing some of the pressure on power generation demand. Even so, recent storage builds have remained relatively light, narrowing the surplus to the five-year average and keeping the market from fully dismissing tightening fundamentals. With production still strong and inventories in healthy shape overall, the near-term balance remains mixed.

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Widespread heat has kept power generation demand propped up into early September, with volumes remaining close to 50 Bcf per day and well above year-ago levels. This is working to stunt storage growth during a period when injections are typically more robust. Temperature forecasts show warmer-than-normal anomalies persisting through at least mid-month, but the intensity of the heat in most markets should subside from here, allowing gas consumption to begin relaxing.

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The EIA reported a 30-Bcf storage injection this morning, roughly in line with market expectations but below both last year and the five-year average for a third consecutive week. Recent heat has slowed storage growth and narrowed the surplus to the five-year average to 160 Bcf, while inventories now trail 2025 by 50 Bcf. This week’s widespread heat should keep next Thursday’s build relatively small, although cooling demand is likely to decline more meaningfully beyond the first week of September as normal temperatures begin their seasonal descent.

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Today’s gains were posted as the market anticipates another smaller-than-average storage build in tomorrow’s EIA report. A survey by The Wall Street Journal showed consensus forecasts near 29 Bcf, with responses ranging from 22 to 39 Bcf. If the consensus is realized, it would shave 8 Bcf off the surplus to the five-year average and add 21 Bcf to the deficit versus 2025 levels. With heat lingering through at least the first week of September, subsequent reports could also show relatively small builds.

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Near-term heat remains the main source of support for the market, with widespread above-normal temperatures expected over the next several days. That should keep power-generation demand elevated and limit storage injections in the near term, but the impact has so far been mostly confined to the front of the curve. With production still running at strong levels and inventories in generally healthy shape, the market continues to show little urgency beyond the immediate weather window.

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With elevated power burn likely to stick around through at least this week, the market remains well supported. Storage injections for the week ended Friday, August 28, and the week ending September 4 are both projected to be relatively light, which could chip away at end-of-season storage expectations. However, with production back near record levels and weather-related demand set to fall off in the coming weeks, the market is not pricing in much lasting impact from the current stretch of heat.

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Traders are bracing for a round of significant heat in the coming days. With hot weather still lingering across the South, key population centers in the Midwest and East are expected to see major heat return next week. Population-weighted cooling degree days will be elevated but are expected to remain short of levels experienced earlier in the summer. With normal temperatures beginning to fall quickly at this point in the season, it will take extreme anomalies to drive outsized energy demand as the calendar rolls deeper into September.

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