Nat-Gas Prices Rally on Forecasts for Hotter US Weather

July Nymex natural gas (NGN26) on Tuesday closed up +0.092 (+2.92%).

Nat-gas prices rallied to a 1-week high on Tuesday and settled sharply higher as US weather forecasts turned hotter, potentially boosting nat-gas demand from electricity providers to power air-conditioning.  The Commodity Weather Group on Tuesday said forecasts shifted warmer, with above-average temperatures expected across the western US through June 30.

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Nat-gas also received support on Tuesday amid a rebound in US nat-gas exports, signaling strong foreign demand that could shrink domestic supplies.  Nat gas flows to LNG export terminals on Tuesday jumped by +11.4% w/w to a seven-week high of 19.6 bcf/day as seasonal maintenance on export terminals ends and exports resume.   

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 Tuesday was 109.7 bcf/day (+2.7% y/y), according to BNEF. Lower-48 state gas demand on Tuesday was 68.3 bcf/day (+1.6% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Tuesday were 19.6 bcf/day (+11.4% 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 9, gas storage in Europe was 43% 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 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.

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. This article was originally published on Barchart.com