Nat-Gas Prices Rally on Hotter US Weather

The Commodity Weather Group confirmed warmer temperatures across the western U.S. through June 30, increasing demand for air conditioning. U.S. natural gas exports saw a strong rebound as seasonal maintenance on export terminals concluded, signaling robust foreign demand that will reduce domestic supplies.

An excessively short position by hedge funds, which boosted their net-short natural gas futures positions to a two-year high of 34,059 by June 9, sets the stage for potential short-covering rallies. Medium-term support for prices comes from the outlook for tighter global LNG supplies, specifically due to extensive damage reported by Qatar at the Ras Laffan plant, which accounts for 20% of global LNG supply, and the closure of the Strait of Hormuz.

However, the EIA raised its 2026 U.S. dry natural gas production forecast to 111.0 bcf/day, a negative factor for prices. Despite a bearish EIA report showing a higher-than-expected inventory build of 108 bcf for the week ended June 5, active U.S. nat-gas drilling rigs fell to an 8-month low of 121 rigs by June 12, according to Baker Hughes.