US Natural Gas Futures Rebound on Weather Outlook Despite Supply Glut
Prices recover from a 1.5-week low, though record production and above-average storage levels continue to weigh on medium-term sentiment.
June Nymex natural gas futures rose 5.04 per cent on Wednesday, recovering from a 1.5-week low as updated weather forecasts prompted short covering in the market. The Commodity Weather Group predicted above-average temperatures across the western half of the United States from June 1 to 10, a shift expected to increase electricity demand for air conditioning. The warmer outlook provided immediate support to prices, which had been suppressed by robust domestic supply data.
The price rebound occurred against a backdrop of bearish fundamentals, including record-high US production and abundant storage levels. The US Energy Information Administration raised its forecast for 2026 US dry natural gas production to 110.61 billion cubic feet per day, up from an April estimate of 109.60 billion cubic feet per day. Current production remains near record highs, with active drilling rigs posting a 2.5-year high in late February, although Baker Hughes reported a modest decline of three rigs to 125 for the week ending May 22.
Storage data continues to signal ample supplies in the domestic market. Inventories as of May 8 were 6.5 per cent above the five-year seasonal average, and the previous week’s build of 101 billion cubic feet exceeded both expectations and the five-year average. Consensus forecasts suggest Thursday’s weekly inventory report will show an increase of 96 billion cubic feet for the week ended May 22, which is near the five-year average of 97 billion cubic feet.
Despite the domestic oversupply, medium-term price support remains anchored by potential constraints in global liquefied natural gas markets. Qatar reported extensive damage at its Ras Laffan industrial city, the world’s largest natural gas export plant, which accounts for approximately 20 per cent of global LNG supply. The damage, attributed to attacks by Iran, is expected to reduce export capacity by 17 per cent for three to five years. Additionally, the closure of the Strait of Hormuz has curtailed natural gas supplies to Europe and Asia, potentially boosting US export demand to fill the shortfall.
Electricity demand data offers some positive indicators for the sector. The Edison Electric Institute reported that US electricity output in the lower 48 states rose 2.16 per cent year-on-year to 77,491 gigawatt hours for the week ended May 16. Meanwhile, BNEF data indicated that US dry gas production on Wednesday was 109.8 billion cubic feet per day, while lower-48 state gas demand rose 6.4 per cent year-on-year to 70.1 billion cubic feet per day.
