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US Natural Gas Update: Futures Fall as Ample Supplies Offset Weather Support

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US natural gas futures retreated on Friday as ample domestic inventories and weaker flows to LNG export terminals suggested growing supplies in the domestic market, offsetting support from hotter-than-expected weather forecasts and ongoing geopolitical risks.

The front-month Henry Hub contract and the continuous contract price fell by 3.48% to $3.22 per million British thermal units.

The decline came as US natural gas inventories remained comfortably above seasonal norms. The US Energy Information Administration reported Thursday that working gas in storage rose by 95 billion cubic feet in the week ended May 29, below market expectations for a 99-105 Bcf increase and under the five-year average build of 101 Bcf. Despite the smaller-than-expected injection, inventories stood 5.7% above the five-year seasonal average, indicating adequate supply conditions. Stocks were down 0.8% from a year earlier.

Additional pressure came from reduced LNG export activity. Net flows to US LNG export terminals were estimated at 17.2 Bcf/d on Friday, down 0.2 Bcf from the previous day and 5.8% below the prior week, according to BNEF data cited by Barchart. Export flows remained near their lowest levels in more than two weeks as seasonal maintenance continued to constrain LNG shipments, leaving more gas available for domestic consumption.

Supply fundamentals also remained robust. Dry gas production across the Lower 48 states averaged 110.4 Bcf/d on Friday, up 1.7 Bcf from a year earlier. Domestic demand was estimated at 70.6 Bcf/d, up from the previous day but down 2.0% year-over-year. Celsius Energy said Friday that powerburn rose 3.5 Bcf from the day before to 36.4 Bcf.

Weather forecasts, however, provided some support to prices. Commodity Weather Group said Friday that forecasts had turned hotter, with above-normal temperatures expected across much of the Midwest and Northeast through Jun. 14. Elevated temperatures could increase electricity demand for air conditioning, boosting natural gas consumption.

Geopolitical developments, or the lack thereof, also remained supportive as negotiations between the US and Iran appeared to be at a standstill with no progress on reported efforts to fully open the Strait of Hormuz, which remained effectively closed for the 14th week.

Meanwhile, European gas inventories remained relatively tight. Gas Infrastructure Europe reported Friday that storage facilities stood around 41% of capacity, well below the five-year seasonal average of 56% for this time of year, according to data from the Swiss Federal Office of Energy.

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