NATURAL GAS SUPPLY SNAPSHOT
- Natural gas prices remain volatile, driven more by speculative trading than by market fundamentals
- A larger-than-expected storage injection of 104 Bcf pressured prices, causing the June contract to drop 19.6¢ intraday
- However, technical indicators stay positive, and a seasonal dip in supply could offer price support
NATURAL GAS SUPPLY AND DEMAND DYNAMICS
- Storage & Production: Storage injections remain robust, with last week’s 96 Bcf addition contributing to a growing surplus. Production holds strong at 105.8 Bcf/d, slightly down day-over-day and week-over-week but still up 3.7 Bcf/d year-over-year. The surplus over the five-year average has expanded to +6.6%, while the deficit from last year has narrowed to -6.3%.
- Demand: Heat-driven electricity demand surged due to a heat dome over the central and eastern U.S., boosting recent injections. However, this heat dome is expected to break down, potentially easing demand in the near future. LNG exports rose to nearly 16 Bcf/d last week, with maintenance wrap-ups potentially pushing exports to near 17 Bcf/d, supported by increasing European and UK gas prices.
- Price Snapshot: Henry Hub spot prices sit at $3.23, 36¢ below the front-month futures. The NYMEX July contract settled at $3.261/MMBtu, down 80¢ from a week ago, reflecting ample supply and geopolitical calm around the Israel-Iran conflict.
MARKET OUTLOOK & RECOMMENDATIONS
- Why Buy Now? Strong injections and production continue to build surplus, pressuring prices lower in the near term. However, heat-driven demand and rising LNG exports offer some upside potential. The market is currently soft but may experience short-term bullish bursts driven by speculative interest.
- Procurement Strategy: To manage costs effectively, buyers should aim to minimize premiums on forecasted components, especially capacity charges. Passing through actual capacity costs rather than worst-case estimates is advisable, as capacity availability for 2026/2027 remains uncertain. Consider hedging energy blocks starting early 2028, as natural gas prices post-2027 are trading near three-year lows, presenting a buying opportunity.
Natural Gas Production:
RISK ASSESSMENT
Short to Medium Term: Front-month prices may face downside risk into late spring, particularly in PJM futures. Risk-averse buyers might consider locking in recent price declines.
Long Term: Calendar 2026 carries upside price risks due to potential load growth and tightening reserve margins. While fundamentals appear weak, economic factors such as a recession or warmer winters could create favorable procurement windows in the future.
EIA: Natural Gas Storage Report
AD Hub RTC Forward Pricing
NYMEX Natural Gas Calendar Strips
ALL ABOUT THE NYMEX 12-MONTH STRIP
- The NYMEX Twelve Month Strip is the average of the upcoming 12 months of closing Henry Hub natural gas futures prices as reported on CME/NYMEX.
- A futures strip is the buying or selling of futures contracts in sequential delivery months traded as a single transaction.
- The NYMEX Twelve Month Strip can lock in a specific price for natural gas futures for a year with 12 monthly contracts connected into a strip.
- The average price of these 12 contracts is the particular price that traders can transact at, indicating the direction of natural gas prices.
- The price of the NYMEX Twelve Month Strip can show the average cost of the next twelve months’ worth of futures.
- The NYMEX Twelve Month Strip is also used to understand the direction of natural gas prices and to lock in a specific price for natural gas futures for a year.
6-10 & 8-14 Day Weather Forecasts
- From June 30 to July 6, much of the U.S. will see warm to hot weather, with temperatures ranging from the 80s to 100s.
- Inland California and the Southwest will face extreme heat, with highs between 105 and 115 degrees.
- Later in the week, weather systems will bring showers and cooler temperatures (70s to 80s) to several regions.
- Energy demand will be high for the first three days, then moderate for the rest of the week.
NYMEX Rolling Prompt Month Chart
NYMEX Futures Pricing Analytics
