As we approach the official start of summer, continued production cuts have boosted Henry Hub natural gas above $2 Metric Million British Thermal Unit (MMBtu) for the first time in 14 weeks. With warmer-than-normal temperatures forecasted for most of the U.S. and the potential for a volatile hurricane season, natural gas prices could drive higher this summer.
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Domestic Demand

Over the week of April 29th, total U.S. natural gas consumption saw a significant decline of 6.4 percent or 4.7 billion cubic feet per day (Bcf/d). This drop was primarily attributed to milder weather conditions, resulting in a notable 28.9 percent decrease (5.8 Bcf/d) in residential and commercial usage, alongside a modest 3 percent downturn (0.7 Bcf/d) in industrial consumption.

In their latest summer forecast, meteorologists from the National Weather Service (NWS) predicted that hotter-than-average temperatures are expected across most of the U.S. Record-breaking heat is anticipated from Texas to the Pacific Northwest and the Northeast. During extreme heat, the demand for natural gas for power generation increases as businesses and households rely more on their AC for cooling to combat high temperatures.
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International Demand  

The second-largest Liquefied Natural Gas (LNG) export facility in Texas, Freeport, experienced another shutdown of Train 3 shortly after restarting for production. Freeport staff stated they managed the cooldown and restarted Train 3 to reduce flaring. This is the second shutdown of Train 3 in two weeks, with the previous incident on April 11th attributed to a ventilation flow meter issue.

The Energy Information Administration (EIA) anticipates that U.S. LNG exports will continue to grow in U.S. natural gas trade. This expectation stems from three LNG export projects currently under construction, set to begin operations and be at full production by the end of 2025. The EIA forecasts indicate a 2 percent increase in U.S. LNG exports in 2024, averaging 12.2 Bcf/d, and in 2025, they predict a further 18 percent growth (2.1 Bcf/d) in LNG exports.  
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Production & Supply  

Since the start of 2024, U.S. natural gas production has declined 10 percent, driven by decreased demand brought on by a warmer-than-normal winter. Major industry players like Chesapeake Energy Corp. are actively reducing their operations to maintain price stability, leading to a 34.8 percent decrease in natural gas rigs compared to the previous year. Despite these significant production cuts, natural gas storage in the U.S. remains 39.4 percent (642 Bcf) above the five-year average, at 2,425 Bcf.

Forecasters are predicting an active hurricane season from June 1st to Nov. 30th. Colorado State University researchers forecast 23 named storms, 11 hurricanes, and five major hurricanes, well above the usual seasonal averages. If this forecast holds true, the Gulf Coast, a critical hub for natural gas production and infrastructure, could face disruptions in operations due to the potential impact of severe storms.
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If you have any questions about the information in this newsletter or would like to talk to someone about your natural gas, please call your sales representative.