Thursday’s EIA report is the problem buyers cannot get around. Natural gas inventories rose by 33 Bcf for the week ended July 31. The market expected 30 Bcf. The five-year average build for the period was 23 Bcf.

That is not a tight number. Inventories were down slightly from a year ago but stood 6.7% above the five-year seasonal average. The market can bounce on feedgas and forecasts for a session. It needs repeated smaller builds to change the argument for the rest of the summer.

Production is doing its part to keep the surplus in place. Lower-48 dry gas output was 111.2 Bcf per day Thursday, up 1.8% from a year earlier. The Baker Hughes gas rig count dropped by three to 124 in the latest week, but that is not a number that shifts production expectations.

Then the Hugh Brinson pipeline. Energy Transfer said the line reaches its full capacity of 1.5 Bcf per day by September 1. That puts more Permian gas on a direct path to Henry Hub just as the summer cooling season starts to fade. The supply side is not rolling over. It is adding another source of gas when the market needs demand to carry the entire load.

SpaceX and Amazon Are Bypassing the Grid With Gas Power

The longer-term demand story is building and it is not just LNG. SpaceX plans to construct natural gas power plants for its Terafab semiconductor facility in Texas, with the first phase carrying a price tag near $17 billion. The company is not waiting for the grid. It plans to bring its own power to serve SpaceX and xAI data centers.

Amazon is doing the same thing in Pecos County, Texas, financing a private gas power plant tied to a new data center campus. The proposed GW Ranch project could generate 7.65 gigawatts from 35 turbines.

Those are large numbers but they are not September contract numbers. Permits, construction timelines, turbine deliveries and operating rates all sit between announcement and gas burn. The point is simpler. The grid cannot connect new AI data centers fast enough and the hyperscalers are turning to gas turbines because they need reliable power now.

SpaceX, Amazon, xAI, Google, Meta, Microsoft and Oracle are all part of that push. It creates a domestic demand base that did not exist at this scale a few years ago, but it does not remove the storage surplus sitting on this contract today.

What to Watch

Friday’s bounce came from LNG flows and heat. The next storage report is the test. If the build comes in below expectations, the market has a reason to hold the bid. If it prints heavy again, sellers will press the rally back toward Thursday’s lows.

Crude oil staying low removes one source of energy inflation pressure but also keeps the broader commodity complex from giving natural gas a sympathy bid. The longer-term demand from AI power buildouts and rising LNG exports is becoming harder to dismiss, but neither is moving enough gas right now to offset what storage and production are doing to the front month.

The downtrend is intact and the 50-day moving average at $3.019 is the level that defines whether the selling pressure shifts. The swing chart needs a trade through $2.810 to change the trend, and until that happens, rallies are running into a market where sellers have the structural edge.

More Information in our Economic Calendar.