Stronger US Production Knocks Nat-Gas Prices Lower

August Nymex natural gas (NGQ26) on Monday closed down -0.098 (-2.99%).

Nat-gas prices fell to a 1-week low on Monday and settled sharply lower.  Ramped-up US nat-gas production is weighing on prices after output in the lower-48 US states rose to nearly 114 bcf/day on Sunday, the most in more than 2.5 months. 

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Nat-gas prices recovered from their worst level on Monday amid forecasts for hot US weather, potentially boosting nat-gas demand from electricity providers to power air-conditioning.  The Commodity Weather Group on Monday said forecasts shifted hotter, with above-average temperatures expected across the eastern half of the US through July 3.

US (lower-48) dry gas production on Monday was 111.2 bcf/day (+2.3% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 75.4 bcf/day (+3.3% y/y), according to BNEF.  Estimated LNG net flows to US LNG export terminals on Monday were 19.2 bcf/day (+1.0% w/w), according to BNEF.

Projections for higher US nat-gas production are negative for prices.  On June 9, the EIA raised its forecast for 2026 US dry nat-gas production to 111.0 bcf/day from a May estimate of 110.6 bcf/day.

Nat-gas prices have medium-term support on the outlook for tighter global LNG supplies.  On March 19, Qatar reported “extensive damage” at the world’s largest natural gas export plant at Ras Laffan Industrial City.  Qatar said the attacks by Iran damaged 17% of Ras Laffan’s LNG export capacity, damage that will take three to five years to repair.   The Ras Laffan plant accounts for about 20% of global liquefied natural gas supply, and a reduction in its capacity could boost US nat-gas exports. 

As a negative factor for gas prices, the Edison Electric Institute last Wednesday reported that US (lower-48) electricity output in the week ended June 20 fell -2.17% y/y to 89,351 GWh (gigawatt hours), although US electricity output in the 52 weeks ending June 10 rose +2.45% y/y to 4,347,841 GWh.

Last Thursday’s weekly EIA report was bearish for nat-gas prices, as nat-gas inventories for the week ended June 19 rose by +76 bcf, above expectations of +69 bcf and above the 5-year weekly average of +75 bcf.  As of June 19, nat-gas inventories were down -2.2% y/y, and +5.7% above their 5-year seasonal average, signaling adequate nat-gas supplies.  As of June 27, gas storage in Europe was 48% full, compared to the 5-year seasonal average of 63% full for this time of year.