US Natural Gas Futures Bounce Back Above $3 as Heat Returns

Natural gas futures have recovered from the previous session's dip below $3, with gains driven by profit-taking by short-sellers and support for cash prices as the August contract expires. However, the market remains cautious due to concerns that the hottest summer weather may soon be over. Some heat is expected to return to the 11-15 day outlook, but it needs to intensify for prices to rally.

Natural gas futures have shown signs of recovery from their recent dip below $3, with gains driven by profit-taking by short-sellers and support for cash prices as the August contract expires. However, the market remains cautious due to concerns that the hottest summer weather may soon be over. Some heat is expected to return to the 11-15 day outlook, but it needs to intensify for prices to rally.

Morgan Stanley analysts have noted that while recent market trends may defer but not derail the constructive outlook for Henry Hub prices, they expect prices to rise above $5 in the first half of 2026 [2]. This forecast is based on several factors, including the above-average inventories expected to persist into the winter of 2025-26 and the potential for increased drilling activity to meet rising LNG demand.

In another significant development, Hyperscale Data (NYSE American: GPUS) has announced that its subsidiary Alliance Cloud Services (ACS) has entered into an engineering design agreement with SEMCO Energy Gas Company to develop natural gas infrastructure for its Michigan data center. This project aims to enable 40 megawatts of incremental on-site power generation capacity [1]. The agreement outlines a clear development path, with preliminary engineering and design work for pipeline routing and metering infrastructure, followed by a planned facility construction agreement expected within months. The estimated 15-month timeline for construction indicates a relatively quick deployment schedule for energy infrastructure of this scale.

This development is particularly noteworthy in the context of data center power constraints nationwide. By investing in on-site natural gas power generation rather than solely relying on grid capacity, Hyperscale is addressing one of the primary bottlenecks facing AI infrastructure expansion. On-site generation provides several advantages: reduced transmission losses, potentially lower operational costs, and enhanced reliability through diversified power sources.

The 40MW capacity addition is substantial in data center terms – sufficient to power approximately 25,000-30,000 high-performance computing servers or about 400,000 residential homes. This power expansion positions the Michigan site to potentially host significant AI compute clusters with the high-density power requirements needed for large language model training and inference.

References:
[1] https://www.stocktitan.net/news/GPUS/hyperscale-data-subsidiary-alliance-cloud-services-enters-agreement-bdjqcxz6x0ml.html
[2] https://www.investing.com/news/commodities-news/us-natural-gas-prices-upside-likely-in-2026--morgan-stanley-4157537