Nat-Gas Prices Fall on Storm Threat to US LNG Exports

July Nymex natural gas (NGN26) on Wednesday closed down -0.094 (-2.90%).

Nat-gas prices fell from a 1.5-week high on Wednesday and settled lower on concerns that a tropical cyclone along the US Gulf coast could disrupt LNG export shipments and boost domestic nat-gas supplies.  Tropical storm Arthur, the first named storm of the year, is expected to batter the US Gulf Coast over the next few days, disrupting nat-gas export terminals.   

Expectations of a larger-than-average build in weekly storage are also pressuring nat-gas prices. Thursday’s weekly EIA nat-has inventories are expected to climb by +80 bcf in the week ended June 12, above the five-year average for this time of year of +73 bcf.  In addition, cooler US weather forecasts are bearish for prices as they may dampen nat-gas demand from electricity providers to power air-conditioning.  The Commodity Weather Group on Wednesday said forecasts shifted cooler, with below-average temperatures expected across the Midwest through June 26.

An excessively short position by hedge funds could exacerbate any short-covering rally in nat-gas futures.  Last Friday’s weekly Commitment of Traders (COT) report showed funds boosted their short natural gas future position by 10,726 in the week ended June 9 to 34,059 net-short positions, the most in more than two years.

US (lower-48) dry gas production on Wednesday was 110.1 bcf/day (+2.2% y/y), according to BNEF. Lower-48 state gas demand on Wednesday was 69.4 bcf/day (-5.9% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Wednesday were 19.5 bcf/day (+12.9% w/w), according to BNEF.

Nat-gas prices have 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.

Projections for higher US nat-gas production are negative for prices.  Last Tuesday, the EIA raised its forecast for 2026 US dry nat-gas production to 111.0 bcf/day from a May estimate of 110.6 bcf/day.

As a positive factor for gas prices, the Edison Electric Institute last Wednesday reported that US (lower-48) electricity output in the week ended June 6 rose +2.13% y/y to 83,866 GWh (gigawatt hours), and US electricity output in the 52 weeks ending June 6 rose +2.25% y/y to 4,341,775 GWh.

Last Thursday’s weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended June 5 rose by +108 bcf, above expectations of +100 bcf and the 5-year weekly average of +95 bcf.  As of June 5, nat-gas inventories were down -0.8% y/y, and +6.0% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of June 15, gas storage in Europe was 45% full, compared to the 5-year seasonal average of 59% 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 12 fell by -3 to an 8-month low of 121 rigs, well below the 2.5-year high of 134 rigs set in February 2026.