LNG Exports Are Pulling Gas Out of the Country
LNG feedgas deliveries to U.S. export terminals surged more than 13% from the prior week to between 19.3 and 19.6 Bcf/d. That is the highest print in six to seven weeks and the timing matters because seasonal maintenance is wrapping up at several facilities. Plants are coming back online and the volumes are climbing right when the market needs injections to build a cushion before winter.
Every Bcf that goes to an export terminal is a Bcf that does not go into storage. If these facilities keep running near capacity through July and August, the injection numbers are going to disappoint and the market knows it. International demand is adding pressure on top of that. Reduced LNG availability from Qatar and ongoing risks to major shipping routes are making U.S. cargoes more attractive to global buyers. That is not a short-term story. That pull on domestic supply runs through the rest of the year.
Summer Heat Is Not Here Yet and Power Burn Is Already Firm
Forecasters expect above-normal temperatures across the western United States through the end of June. That has not fully hit the demand numbers yet and power burn is already running strong. U.S. electricity output is more than 2% above year-ago levels right now. When the real heat arrives in July and August and air conditioning load picks up across the major population centers, gas consumption from the power sector is going to climb on top of what is already an elevated baseline.
The concern is not whether a hot week lifts the prompt month a few cents. The concern is whether six or eight weeks of sustained heat keeps power burn elevated long enough to cut into storage builds during the most critical stretch of the refill season. July natural gas broke above its 50-day moving average earlier this week and is holding. That breakout happened before the worst of the summer heat has even started.
Production Is Growing but Rigs Are Falling
Lower-48 dry gas production hit approximately 109.7 Bcf/d, up nearly 3% from a year ago. The EIA raised its forecast for next year’s output. On the surface that looks like enough supply to keep storage comfortable. I am not convinced.
Baker Hughes reported active natural gas drilling rigs dropped by three last week to 121, the lowest count in eight months. Production is still climbing on momentum from earlier drilling activity but fewer rigs now means slower growth later. If demand keeps expanding from LNG and power burn and the rig count keeps falling, the supply side of this market gets tighter at exactly the wrong time.
