U.S. Natural Gas Prices Rise on Above-Average Temperature Forecasts and Geopolitical Supply Concerns

U.S. Natural Gas Prices Rise on Above-Average Temperature Forecasts and Geopolitical Supply Concerns

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July Nymex natural gas (NGN26) futures closed at +0.005 (+0.15%) on Friday, reaching a 2.5-month high as traders priced in forecasts of above-normal U.S. summer temperatures and constrained global liquefied natural gas (LNG) supplies.

Climate models from Vaisala indicate above-average temperatures will persist across the northern two-thirds of the U.S. from June 8-12, likely increasing electricity demand for air conditioning. This comes as U.S. natural gas production remains elevated at 110.6 billion cubic feet per day (+2.0% year-over-year), according to BNEF data, though rig counts held steady at 125.

Geopolitical tensions continue to support pricing, with Iran’s closure of the Strait of Hormuz curbing Middle Eastern gas exports and Qatar’s Ras Laffan LNG facility enduring attack damage that could require three-to-five years to repair. The facility represents 20% of global LNG supply, with experts noting reduced capacity would incentivize U.S. export growth beyond current 18.5 bcf/day levels (+2.1% week-over-week).

Storage remains robust, with EIA data showing 6.2% above-seasonal levels as of May 22. However, May 2 inventory growth (+92 bcf) fell short of weekly average expectations (+97 bcf). European storage levels remain below seasonal norms at 39% capacity versus a 53% average.

Positive demand signals include a 5.2% year-over-year increase in U.S. electricity generation to 81,890 GWh for the week ending May 23, reported by the Edison Electric Institute. Production trends show modest declines from February’s 2.5-year high of 134 active rigs to 125, with operational counts only recovering from September 2024’s 4.75-year low of 94 units.

Market participants face mixed signals: abundant domestic supplies align with production forecasts, yet export demand could surge from geopolitical constraints. Price action remains range-bound near the 2.5-month high as these dynamics evolve.

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