Nymex natural gas futures for July fell by 0.007 dollars, or 0.22%, to 2.278 dollars per million British thermal units on Tuesday, trading above a one-and-a-half-week low. Prices were influenced by forecasts of cooler weather in the US, which could reduce demand for air conditioning.
According to Vaisala, temperatures below normal are expected from June 14 to June 18 in the Midwest and eastern US. Forecasts of increased natural gas production in the US are also putting pressure on prices.
Rising production and geopolitical risks
On Tuesday, the US Energy Information Administration (EIA) raised its forecast for dry natural gas production in the US in 2026 to 111.0 billion cubic feet per day (bcf/day), compared to its May estimate of 110.6 bcf/day. Currently, natural gas production in the US is close to record levels, and the number of active drilling rigs reached a 2.5-year high at the end of February.
Meanwhile, the closure of the Strait of Hormuz due to the war in Iran, which is expected to continue in the near future, is supporting natural gas prices by limiting exports from the Middle East. This could potentially increase US natural gas exports to compensate for the deficit. Additional support in the medium term is provided by forecasts of a worsening global liquefied natural gas (LNG) supply deficit.
On March 19, Qatar reported “significant damage” to the world’s largest natural gas export facility in the industrial city of Ras Laffan. According to Qatar, attacks by Iran damaged 17% of the facility’s LNG export capacity in Ras Laffan, and it will take three to five years to recover. The Ras Laffan facility provides about 20% of global LNG supplies, and the reduction in its capacity could stimulate US exports.
Demand and electricity production
According to BNEF, dry gas production in the lower 48 US states on Tuesday was 110.1 bcf/day, which is 2.2% more than in the same period last year. Gas demand in these states reached 73.2 bcf/day, increasing by 5.8% year-over-year.
Estimated net flows of LNG to US export terminals on Tuesday were 17.9 bcf/day, which is 8.7% more than the previous week. Additionally, the Edison Electric Institute reported last Wednesday that electricity production in the lower 48 US states for the week ending May 30 increased by 6.4% year-over-year, reaching 81,619 gigawatt-hours (GWh).
Source: Yahoo