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US Natural Gas Update: Prices Edge Down Despite Expected Increase in Demand

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US natural gas futures moved modestly lower in midday trading on Tuesday, but remained supported by expectations of stronger power generation demand and a gradual recovery in LNG feedgas flows.

The front-month Henry Hub contract and the continuous contract both lost 0.10% to $3.144 per million British thermal units.

Fundamentals showed a mixed but slightly firmer demand picture. Gelber & Associates said balances are "showing demand strengthening," driven by higher power burn and improving LNG feedgas demand as maintenance activity eases. Weather models continue to point to a hotter pattern through mid-June, with cooling demand expected to build over the coming days, keeping overall consumption above recent levels.

Despite recent production drawdowns, inventories remain elevated. "Although lower output in recent weeks has helped reduce the storage surplus, inventories remain around 5% above the five-year seasonal average, indicating broadly comfortable supply conditions heading into the summer period," Trading Economics said.

NRG Energy noted that US natural gas production has held broadly steady, averaging between 106 Bcf/d and the low 108 Bcf/d range. However, it pointed to softer demand over the past week, with temperatures only gradually trending warmer and forward forecasts moderating expectations over the next 20 days, weighing on futures pricing.

LNG export activity also remains constrained. NRG said feedgas flows have averaged around 16 Bcf/d over the past week, with ongoing maintenance continuing to limit export volumes. It added that while such maintenance is typical for May through June, some facilities are scheduled for extended outages into later summer months.

In the longer term, the US Energy Information Administration said Tuesday that rising natural gas demand for electricity generation and continued growth in US exports are expected to put upward pressure on prices in the second half of 2027. The agency projects Henry Hub spot prices will average about $3.34/MMBtu in the second half of this year and $3.55/MMBtu in the second half of next year.

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