(Investing) – U.S. natural gas prices have fallen back of late, reflecting a lingering storage surplus and a milder shift in summer weather, but Morgan Stanley still sees more upside in 2026.
At 09:05 ET (13:05 GMT), natural gas prices rose 2.4% to $3.138 per million British thermal units, or MMBtu, but are down around 9% over the course of the last month and over 13% year-to-date.
Gas inventories built at an above normal rate for much of the April-June period due to mild spring weather, strong supply, heavy LNG facility maintenance, and weaker year-over-year power burns, according to analysts at Morgan Stanley, in a note dated July 29.
While July storage changes were much closer to seasonal norms, this did little to address the surplus created over the soft preceding months. With peak summer heat now almost in the rear-view and August forecasts skewing mild, the reality of entering winter 2025-26 with above average inventories is becoming increasingly “locked in”.
That said, despite recent increases in drilling activity, investment levels are still below what the market needs to meet rising LNG demand into 2026. In addition, with prices back near $3, further rig additions may start to get deferred again.
“Overall, we think recent market trends defer (but don’t derail) the constructive Henry Hub outlook and continue to forecast prices rising >$5, but now expect this to occur in 1H26 vs 2H25 prior,” said analysts at Morgan Stanley.
