June Nymex natural gas (NGM26) on Tuesday closed down -0.013 (-0.45%).
Nat-gas prices on Tuesday fell to a 1-week low and settled lower amid forecasts of below-normal US weather, which will curb nat-gas demand from electricity providers to power air-conditioning. The Commodity Weather Group said Tuesday that forecasts shifted cooler, with below-average temperatures expected across the eastern half of the US from May 31 to June 4.
Nat-gas prices recovered some of their losses on Tuesday amid signs of strength in US LNG exports. Short covering emerged in nat-gas futures on Tuesday on signs that stronger exports are eating into domestic nat-gas stockpiles after gas flows to LNG export terminals jumped +8.8% w/w.
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.
On April 17, nat-gas prices tumbled to a 1.5-year nearest-futures low amid robust US gas storage. EIA nat-gas inventories as of May 8 were +6.5% above their 5-year seasonal average, signaling abundant US nat-gas supplies.
The outlook for the Strait of Hormuz to remain closed for the foreseeable future is supportive for nat-gas as the closure will curb Middle Eastern nat-gas supplies, potentially boosting US nat-gas exports to make up for the shortfall.
US (lower-48) dry gas production on Tuesday was 110.6 bcf/day (+3.1% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 66.6 bcf/day (+6.8% y/y), according to BNEF. Estimated LNG net flows to US LNG export terminals on Tuesday were 18.4 bcf/day (+8.8% w/w), according to BNEF.
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 reported last Wednesday that US (lower-48) electricity output in the week ended May 16 rose +2.16% y/y to 77,491 GWh (gigawatt hours), and US electricity output in the 52 weeks ending May 16 rose +1.83% y/y to 4,331,062 GWh.
Last Thursday's weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended May 15 rose by +101 bcf, above expectations of +98 bcf and the 5-year weekly average of +92 bcf. As of May 15, nat-gas inventories were up +0.7% y/y, and +6.6% above their 5-year seasonal average, signaling ample nat-gas supplies. As of May 20, gas storage in Europe was 37% full, compared to the 5-year seasonal average of 51% 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 May 22 fell by -3 to 125 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.
