Natural gas markets were rangebound Monday as weather shifts, supply trends, and geopolitical risks continued to offset longer-term fundamental pressures, EBW Analytics said in a Monday note.
US natural gas futures briefly tested resistance near $2.883/MMBtu before slipping into the high-$2.60s last week. Prices later stabilized following a bullish Energy Information Administration storage report.
However, EBW said weakening LNG feedgas demand and rising domestic production continue to pressure the market, with July-December contracts showing significantly more weakness than the front month.
Weather forecasts added 12 cooling degree days to the May outlook, which could lift near-term sentiment. Still, EBW cautioned that it is too early for a sustained pre-summer rally. Late-May demand erosion could drive unusually large storage injections, potentially pushing inventories more than 200 billion cubic feet above five-year averages.
LNG feedgas has fallen about 2.5 Bcf/d from April highs due to maintenance at major export facilities, including Cameron LNG and Corpus Christi, along with softer flows at Sabine Pass. At the same time, production has rebounded across the Marcellus and Permian, reinforcing expectations for stronger storage builds into early summer.
EBW noted that heating demand is set to fall sharply over the next two weeks, increasing the risk of triple-digit weekly injections into late May and June. However, heavy speculative short positions leave the market vulnerable to upside driven by hotter weather.
Despite demand concerns, global oil balances remain tight. US gasoline and distillate inventories are at decade seasonal lows, while Chinese imports have fallen by 3-3.5 million barrels per week due to disruptions. EBW warned that shipping delays will continue to push inventory declines for weeks, even under improved conditions in the Strait of Hormuz.
Globally, shortages are already appearing in refined products, particularly jet fuel in Europe and supply-constrained regions in Asia. Analysts said markets may reach minimum operating thresholds well before outright depletion, with potential stress conditions emerging as soon as June.
US power demand surprised to the upside last week, with stronger loads in New England and the Central Industrial region more than offsetting declines in the South Central, according to market data. Despite the demand strength, power-sector natural gas consumption still edged lower by 0.1 Bcf/d as rising nuclear generation displaced gas-fired output.
Regional power prices remained mixed. Day-ahead pricing in PJM West rose to $48.95/MWh, extending the trend of elevated spring shoulder pricing. In contrast, ERCOT North prices fell to $27.17/MWh as weaker loads and stronger wind generation weighed on the market after very low levels the prior week.
Nuclear output rose 2.4%, reaching five-year seasonal highs, led by gains in the Southeast and Mid-Atlantic. The increase further limited gas burn for electricity generation while helping stabilize broader power pricing.