While the Nearby and August futures contract focus on current weather conditions and storage, December traders are eyeing the Super El Niño developments.
Production Keeps the Ceiling Low
Lower-48 dry gas production averaged 111.2 billion cubic feet per day Wednesday, running 3.2% above year-ago levels, and the EIA raised its 2026 production forecast to match that pace. Baker Hughes reported the rig count holding steady at 126, so producers are not pulling back despite prices sitting under $3. The supply side of this market is not giving the bulls anything to work with.
LNG feed gas deliveries eased to 17.8 billion cubic feet per day, down 3.3% from the previous week, which takes another potential demand source off the table for now. Ras Laffan export facility damage in Qatar could eventually tighten global LNG supply enough to pull more U.S. gas into export channels, but that is a longer-term story and it is not showing up in this week’s feed gas numbers.
The Heat Is Real but the Storage Surplus Is Bigger
Forecasts are calling for upper 80s to above 100 degrees across the northern half of the country through July 19, with major Midwest and East Coast cities pushing into the 90s. Texas and the Southwest are the soft spot with showers keeping temperatures mostly in the 80s before hotter weather returns later in the period. Cooling demand is elevated and air conditioners are running at full capacity across most of the country.
The storage picture is not cooperating with the weather story. Inventories are sitting 6.6% above the five-year seasonal average and only 0.8% below last year. Analysts expect the EIA to report a 44 billion cubic feet injection for the week ended July 10, nearly matching the five-year average build of 45 billion cubic feet. An in-line number does nothing to change the supply cushion that keeps professional money comfortable on the short side.
What to Watch
The EIA number at 14:30 GMT is the session. A smaller injection than the expected 44 billion cubic feet gives buyers a reason to test the upper end of the consolidation range, and a breakout over $2.946 on the nearby contract opens the path toward the 50-day moving average where the bears are likely waiting. A build at or above expectations keeps the downtrend intact and the 6.6% storage surplus gives sellers the confidence to press.
Production running above 111 billion cubic feet per day with a steady rig count means the supply side is not fading, and that overhang stays in place regardless of what the weather does over the next two weeks. El Niño expectations for a warmer fall and winter are weighing on the deferred contracts and the February futures are already drifting lower into the long-term retracement zone. The near-term trade is weather versus storage. The longer-term trade still belongs to the bears until production gives them a reason to step aside.
