Smaller-Than-Expected Weekly Storage Increase Lifts Nat-Gas Prices

July Nymex natural gas (NGN26) on Thursday closed up +0.088 (+2.80%).

Nat-gas prices settled sharply higher on Thursday on a smaller-than-expected increase in weekly storage levels.  The EIA reported on Thursday that nat-gas inventories rose +73 bcf in the week ended June 12, below expectations of +80 bcf. 

Forecasts of warmer-than-normal US weather are also supportive of nat-gas prices, as warmer temperatures may boost nat-gas demand from electricity providers to power air-conditioning.  Weather forecaster Vaisala said Thursday that most of the lower 48 US states are expected to see above-normal temperatures from June 28 to July 2. 

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 Thursday was 111.4 bcf/day (+4.4% y/y), according to BNEF. Lower-48 state gas demand on Thursday was 71.9 bcf/day (-3.1% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Thursday were 19.2 bcf/day (+2.8% 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.

Thursday’s weekly EIA report was bullish for nat-gas prices, as nat-gas inventories for the week ended June 12 rose by +73 bcf, below expectations of +80 bcf but right on the 5-year weekly average.  As of June 12, nat-gas inventories were down -1.5% y/y, and +5.8% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of June 16, gas storage in Europe was 45% full, compared to the 5-year seasonal average of 60% full for this time of year.

Baker Hughes reported Thursday that the number of active US nat-gas drilling rigs in the week ending June 19 rose by +1 to 122 rigs, well below the 2.5-year high of 134 rigs set in February 2026.