July Nymex natural gas (NGN26) on Monday fell -0.082 (-2.54%).
Nat-gas prices tumbled to a 1-week low on Monday and settled sharply lower. Prices fell Monday as shifting US weather forecasts to milder conditions in the second half of June could reduce nat-gas demand from electricity providers to generate power for air-conditioning. On Monday, forecaster Vaisala said forecasts shifted cooler in the eastern two-thirds of the US for June 13-17, and forecasts also trended cooler for June 18-22.
The outlook for the Strait of Hormuz to remain closed for the foreseeable future is supportive of nat-gas prices, as the closure has curbed Middle Eastern nat-gas exports, potentially boosting US nat-gas exports to offset the shortfall.
US (lower-48) dry gas production on Monday was 112.1 bcf/day (+3.7% y/y), according to BNEF. Lower-48 state gas demand on Monday was 72.4 bcf/day (+8.7% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Monday were 17.6 bcf/day (+4.0% w/w), according to BNEF.
Projections for higher US nat-gas production are negative for prices. On May 12, the EIA raised its forecast for 2026 US dry nat-gas production to 110.61 bcf/day from an April estimate of 109.60 bcf/day. US nat-gas production is currently near a record high, with active US nat-gas rigs posting a 2.5-year high in late February.
Nat-gas prices have some medium-term support on the outlook for tighter global LNG supplies. On March 19, Qatar reported “extensive damage” at the world’s largest natural gas export plant at Ras Laffan Industrial City. Qatar said the attacks by Iran damaged 17% of Ras Laffan’s LNG export capacity, a damage that will take three to five years to repair. The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports. Also, the closure of the Strait of Hormuz due to the war in Iran has sharply curtailed nat-gas supplies to Europe and Asia.
As a positive factor for gas prices, the Edison Electric Institute last Wednesday reported that US (lower-48) electricity output in the week ended May 30 rose +6.4% y/y to 81,619 GWh (gigawatt hours), and US electricity output in the 52 weeks ending May 30 rose +2.18% y/y to 4,340,023 GWh.
Last Thursday’s weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended May 29 rose by +95 bcf, below expectations of +99 bcf and the 5-year weekly average of +101 bcf. As of May 29, nat-gas inventories were down -0.8% y/y, and +5.7% above their 5-year seasonal average, signaling adequate nat-gas supplies. As of June 6, gas storage in Europe was 42% full, compared to the 5-year seasonal average of 57% full for this time of year.
Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending June 5 fell by -1 to 124 rigs, modestly below the 2.5-year high of 134 rigs set on February 27. In the past 19 months, the number of gas rigs has risen from the 4.75-year low of 94 rigs reported in September 2024.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
