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Can Weather-Driven Demand Sustain the Rebound?
Forecasts continue to cap near-term enthusiasm. NatGasWeather expects below-normal temperatures for most of the Midwest and East through May 27, keeping national demand on the lighter side. Daytime highs are pegged in the 50s–70s, with some pockets even cooler. Meanwhile, hot and dry conditions across the western and southern U.S. are expected to hold through early June, potentially pushing national demand higher if the pattern persists.
While a true heat-driven demand surge remains speculative, the market responded to forecasts hinting at stronger conditions by June 2–4. The promise of higher power burn from air conditioning demand offers a bullish case, but the timing is still distant and subject to revision.
What Role Are Cash Prices and Export Flows Playing?
Support from the physical market helped fuel Tuesday’s gains. Waha cash prices flipped into positive territory, a key signal of improving regional fundamentals. Export flows remain a pillar of support as U.S. shipments to Mexico hit record levels, reflecting robust cross-border demand. However, LNG exports were slightly lower week-over-week at 15.0 Bcf/day, tempering some of the bullish sentiment.
Dry gas production remains elevated at 106.1 Bcf/day, up 5.1% year-over-year. Demand, by contrast, is lagging—Tuesday’s Lower 48 consumption came in at 67.5 Bcf/day, down 2% from a year ago. These figures reinforce the underlying supply-heavy backdrop, even as short-term bullish momentum builds.
Are Inventories and Electricity Demand Signaling Caution?
Last Thursday’s EIA storage report showed an injection of 110 Bcf, matching expectations but well above the five-year average of 83 Bcf. Storage is now 2.6% above the five-year average, despite being 14.6% below last year’s level. Meanwhile, electricity output fell 2.8% year-over-year in the week ending May 10, a bearish signal for natural gas demand from utilities.
In Europe, gas storage stood at 45% full as of May 18, below the five-year norm of 55%, lending modest support to global gas prices that could spill over into U.S. benchmarks.
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