August Pricing Analysis - North American Natural Gas

SUMMARY

August was a month of two natural gas markets pulling in opposite directions. Nationally, Henry Hub drifted lower as ample storage and record production kept a lid on the flat price, easing to $2.77/MMBtu before a late-month recovery tied to Freeport LNG's return from maintenance lifted the close back to $2.90. Regionally, the more interesting move was underneath the flat price: the Permian's chronic takeaway problem kept resolving itself, with new pipeline capacity pulling Waha's discount in to -$0.77/MMBtu from -$1.14 in July, while the Northeast quietly broke the other way. Transco Zone 6 NY spent the entire month without a single positive basis print, the first such month in the six-month window pulled for this report, even as Algonquin still saw its usual intraday spikes. Henry Hub's own volatility calmed to a six-month low (CV 3.92%), but that calm masked a widening gap between settling national fundamentals and increasingly divergent regional ones. Heading into the fall shoulder season, the storage cushion should keep flat-price risk contained, leaving the Permian buildout and the Northeast basis split as the two threads most likely to define how basis trades into winter.

PRICE ACTION

• Henry Hub eased 4.1% MoM to $2.77 as storage surplus and record production capped the summer rally, though the month closed near its high
• Henry Hub averaged $2.7688/MMBtu in August, down 4.1% MoM from July's $2.8869 and down 4.5% YoY from August 2025's $2.9000, tracking a well-supplied backdrop rather than a demand shock.
• Monthly range compressed to $0.4304 (high $2.9449 on Aug 19, low $2.5145 on Aug 6), roughly half July's $0.8441; June and August are now the two tightest months of the past year.
• The month traded a clean recovery arc: W1 averaged $2.6275 off the Aug 6 low, then W2 $2.7756 (+5.63% WoW) and W3 $2.8346 (+2.13% WoW) as Freeport LNG's maintenance turnaround approached completion; W4 eased to $2.8117 (-0.81% WoW) before the month closed at $2.8983 on Aug 31.
• The largest single-day move was +$0.1756 (+6.86%) on Aug 10, the session immediately after the monthly low.
• Close sat $0.31 above open, so the -4.1% MoM average understates the intra-month recovery; the level and the trend point in different directions this month.
• EIA's August STEO cut its full-year 2026 Henry Hub forecast to $3.44/MMBtu from $3.67 in July (EIA); the September prompt contract has averaged $2.74/MMBtu since becoming front-month on Jul 30.

CROSS-MARKET DYNAMICS

• Record production and a storage surplus kept a ceiling on Henry Hub even as Freeport's return began firming the floor
• Working gas inventories stood 185 Bcf above the five-year average as of the week ended Aug 14 (3,169 Bcf) and 198 Bcf above as of Aug 7 (EIA); the surplus, not August heat, is what capped Henry Hub's upside this month.
• Lower 48 dry gas production is on track for a new annual record near 111.2 Bcf/d in 2026, up 3.3% over the 2025 record (EIA); rising supply left less room for weather-driven demand to move the flat price.
• Freeport LNG's maintenance turnaround removed roughly 2 Bcf/d of nominal feedgas capacity from Jul 10; EIA expected the work to conclude in late August, and the recovery in feedgas demand lines up with the W2-W3 rally and the Aug 31 close near the month's high (EIA).
• EIA's August STEO raised its Q3 2026 storage forecast to over 3.6 Tcf, 0.6% above the July STEO, so the supply cushion looks likely to persist into the fall shoulder rather than close quickly.
• The Permian egress buildout described below is the connective tissue to this section: as Waha strengthens toward Henry Hub, more associated gas clears the basin, feeding the same production growth capping HH nationally.

CROSS-REGIONAL DYNAMICS

• Permian egress keeps compressing the Waha discount while the Northeast diverges, and Transco Zone 6 NY loses its positive-basis window entirely
• Waha basis averaged -$0.7660/MMBtu in August, in from -$1.1359 in July, with the intra-month range compressing to $0.61 from $2.19; this extends a normalization from March's $13.05 range as new Permian takeaway capacity keeps coming online ahead of schedule.
• Three separate projects are the mechanism, not one: Kinder Morgan's 570 MMcf/d Gulf Coast Express compression expansion (in service since Jun 9), Energy Transfer's 1.5 Bcf/d Hugh Brinson pipeline (flowing since Jun 13, ahead of schedule), and early volumes on the 2.5 Bcf/d Blackcomb pipeline (commissioning in July). Each is a structural addition to outbound capacity, so the narrowing basis reflects takeaway coming online, not a shift in Permian demand.
• Houston Ship Channel and Katy moved in lockstep and strengthened modestly (+$0.031 and +$0.047 MoM) with ranges tightening to $0.31 and $0.29; both hubs absorbed Freeport's midsummer feedgas reduction without stress.
• Chicago Citygate remained the most stable hub in the set, averaging -$0.2417/MMBtu on a $0.27 range, little changed from July.
• Algonquin Citygate and Transco Zone 6 NY moved the opposite direction from the Gulf Coast and Permian hubs: Algonquin's average weakened to -$0.5018/MMBtu from -$0.2236, and TZ6's to -$0.7922 from -$0.5045. Northeast regional electric power demand fell 8.3% week over week as of the week ended Aug 20, as the month's heat stayed concentrated in the South and Southwest rather than the Northeast.
• The more durable shift looks structural rather than seasonal: TZ6's intra-month high fell from +$0.9015 in July to -$0.0149 in August, meaning the basis never traded positive all month, the only such month in the six-month window pulled for this report. Algonquin, by contrast, still touched +$1.8691 intraday (Aug 5) even as its average weakened, so the two Northeast hubs are now diverging from each other, not just from the rest of the curve.

PRICE VOLATILITY

• Henry Hub's CV eased back near a six-month low while Algonquin's range keeps widening against the seasonal grain
• Henry Hub's CV came in at 3.92% in August, essentially matching June's 3.79% as the calmest points of the six-month window, and a sharp step down from July's 9.15%.
• Waha's range has now compressed for five straight months, from $13.05 in March to $0.61 in August, the cleanest trend in the data set and a direct readout of the egress buildout in Cross-Regional Dynamics.
• Algonquin is the exception to the calming pattern: its range has widened in each of the last three months ($1.64 Jun, $2.63 Jul, $2.96 Aug), running counter to Henry Hub's own trend toward calm.

SOMETHING TO WATCH

• Storage trajectory into the fall shoulder:
  • Observation: storage sat 185 Bcf above the five-year average as of Aug 14 (3,169 Bcf), and EIA's August STEO raised its Q3 2026 storage forecast to over 3.6 Tcf.
  • Why it matters: entering the November withdrawal season with a large surplus caps upside price risk through the shoulder and into early winter, unless an early cold snap accelerates draws.
  • What to monitor: EIA Weekly Natural Gas Storage Report (Thursday 10:30 ET); trajectory vs the five-year average through September and October.
• Permian egress buildout and the Waha basis:
  • Observation: Waha's discount narrowed to -$0.77/MMBtu average in August from -$1.14 in July, with GCX, Hugh Brinson, and early Blackcomb volumes all now flowing.
  • Why it matters: Hugh Brinson is targeted to reach full Phase 1 capacity (1.5 Bcf/d) by September 1, and Blackcomb's full commercial service is targeted for Q4 2026; each in-service step could narrow the discount further, and producer commentary already flags a risk of Permian egress overbuild into 2027.
  • What to monitor: Waha cash and basis prints as Hugh Brinson and Blackcomb ramp; pipeline in-service announcements.
• Northeast basis divergence, especially Transco Zone 6 NY:
  • Observation: TZ6 never traded positive intra-month in August (Jul high +$0.90 to Aug high -$0.01), while Algonquin still touched +$1.87 intraday on Aug 5.
  • Why it matters: if TZ6 keeps underperforming Algonquin into the fall, it marks a durable change in the two hubs' relationship rather than a one-month blip, heading into a winter where both hubs typically see the sharpest premium.
  • What to monitor: weekly Algonquin-HH and TZ6-HH closes into September; Transco system capacity notices.

Note: All figures, prices and market activity referenced in this report are based on the period 1 to 31 August 2026.