U.S. natural gas futures declined 2.3% to $3.139/mm Btu as abundant supply and above-average storage levels continued to cap weather-driven rally attempts. The drop reflects a market still digesting record production that has kept inventories comfortable despite rising export demand.

Bank of America Global Research raised its second-half Henry Hub forecast to $3.80/mm Btu from $3.60/mm Btu, citing tightening fundamentals. Analysts Clifton White and Francisco Blanch noted that production growth has been more than offset by LNG feedgas demand, power-sector consumption, and Canadian import flows. They maintained their 2027 price estimate at $4/mm Btu, signaling a structural floor above current levels.

The upgrade hinges on summer heat forecasts that could spike cooling demand and accelerate storage draws. If temperatures materialize as projected, the market may test the bank's higher target sooner than expected. However, the persistent supply overhang means any rally remains vulnerable to production resilience.

For traders, the divergence between spot weakness and elevated forward curves creates a classic carry trade setup. Producers with hedging programs gain clarity on a higher floor, while LNG exporters face narrower arbitrage windows if Asian demand softens. The market's next inflection point likely arrives with the next storage report — a bullish draw could validate BofA's optimism, while a build would reinforce the bearish supply narrative.