At 18:45 GMT on August 18, September natural gas futures were trading at $2.774 per million British thermal units, up $0.084 or 3.12%.

Record Output and Freeport Maintenance Are Still Capping Every Rally

Lower-48 dry gas output has averaged about 111.6 Bcf per day in August, above July’s record monthly average of 110.7 Bcf per day. Producers have not flinched at lower prices. Associated gas from Permian oil drilling keeps adding supply whether the gas market wants it or not. Oil producers do not stop drilling because natural gas prices soften. The gas comes with the oil. Haynesville production is also running full. The gas keeps showing up regardless of what the weather is doing.

Freeport LNG maintenance has kept roughly 2 Bcf per day of export capacity offline since July. That gas has stayed in the domestic market at the worst possible time, piling into storage during the weeks when summer demand was supposed to be drawing the surplus down. Feedgas deliveries to the nine major U.S. LNG plants have averaged about 17.3 Bcf per day this month, slightly above July and close to the June record. Freeport is the missing piece. The maintenance is expected to wrap up later this month. Tuesday’s rally priced the heat, not the export recovery, and that recovery has not started yet.

The Heat Has to Show Up in Thursday’s EIA Weekly Natural Gas Storage Report

Houston is expected to average near 100 degrees Fahrenheit from August 20 through August 23, about five degrees above normal. The Texas power grid could set another demand record if the heat holds and wind generation drops during peak hours. Monday’s cooler models had the market thinking cooling demand was fading into the shoulder season. Tuesday’s models changed that view overnight.

Working gas in storage sat at about 3,153 Bcf as of August 7, roughly 6% to 7% above the five-year seasonal average. The surplus grew through the hottest stretch of the summer. Thursday’s EIA weekly natural gas storage report covers the week ending August 14. Early estimates point to an injection near 14 Bcf, below the five-year average and below last year’s build for the same period. That would be the first storage number that actually reflects what the heat has been doing. Every previous report came in heavy regardless of the temperature, and Tuesday’s rally needs Thursday to confirm it.

Daily September Natural Gas Futures Technical Analysis