Global LNG fundamentals are working in favor of sustained U.S. export demand. The damage to Qatar’s Ras Laffan complex and ongoing disruptions to Middle Eastern energy flows have made U.S. cargoes more important to the global market. That pull on domestic supply is not going away even if Arthur slows it for a few days.
Production Is Strong but the Rig Count Says Something Different
Lower-48 dry gas production averaged 110.1 Bcf per day this week, up 2.2% from a year ago and sitting near record levels. The EIA raised its 2026 forecast to 111.0 Bcf per day. Strong associated gas from oil-directed drilling keeps adding molecules to the market whether gas prices justify it or not.
The rig count tells a different story. Baker Hughes reported active natural gas rigs fell by three last week to 121, the lowest in eight months. Production is still riding momentum from earlier drilling but the pipeline of new wells is shrinking. At some point the production curve flattens and if demand is still climbing from LNG and power burn when it does, the supply side of this market tightens in a hurry.
The bears point to 110.1 Bcf per day and call the supply argument settled. I would point to 121 rigs and call it a lag.
Weather Pulled the Rug on Wednesday but Summer Is Not Over
July natural gas settled Wednesday at $3.146, down 2.9% after giving back an early rally to a one-and-a-half-week high. The selloff came after Commodity Weather Group shifted its forecast cooler across the Midwest through June 26. That pulled expected power-sector gas consumption lower and gave sellers an excuse to push the market back to the 50-day moving average.
One forecast revision does not kill the summer heat thesis. June is not July and August. When sustained heat builds across the major population centers and air conditioning load runs for weeks instead of days, power burn becomes the demand story that overwhelms even 110 Bcf per day of production. Wednesday’s cooler revision took the urgency out of the near-term trade but did nothing to change the second-half-of-summer setup.
What to Watch
The EIA number hits this morning and 34,059 net-short contracts are waiting on it. A build below 80 Bcf on a consensus of 80 to 82 Bcf starts the squeeze conversation. A print near or below the five-year average of 73 Bcf and the short covering accelerates through the 50% levels at $3.145 and $3.207 with $3.396 as the breakout trigger toward the 200-day at $3.589.
A build above 90 Bcf keeps the surplus intact and the bears in control, but they are holding the largest short position in two years on top of a market that has built a floor of progressively higher lows since April. The 50-day moving average at $3.116 is the line. The storage report is the catalyst. And the short side of this market is crowded enough that the exit is going to be narrow if the data goes against them.
More Information in our Economic Calendar.
