LNG Demand Is Not Going Anywhere
U.S. LNG shipments are running strong despite temporary maintenance at some export facilities. Corpus Christi and Golden Pass are adding capacity. Every cargo that leaves the country removes supply from the domestic system and that tightening is consistent regardless of what the weather is doing on any given week. The Strait of Hormuz situation keeps European and Asian buyers sourcing American LNG as an alternative to disrupted Middle Eastern supply. That structural demand does not reverse on a single storage report or a cool week in June.
Production Gave Bulls an Opening
Output in the Lower 48 softened at exactly the right moment. Low prices earlier this year pulled producers back. Maintenance work cut into volumes further. The market spent the spring trading like supply was flooding in from every direction. Then production slipped and weather demand started building at the same time and the bears lost their argument. Once the oversupply story lost its grip buyers came back and they have not left.
Storage Stayed Out of the Way
85 billion cubic feet into storage last week. Close to expectations. No surprise build that would have handed bears a fresh argument. Inventories sit slightly above the five-year average but the report was clean enough not to disrupt improving sentiment. In a market looking for reasons to buy a neutral storage number is almost as good as a bullish one. The bears needed a big build to reassert themselves. They did not get it.
Power Burn Is Building
Three demand channels are pulling on supply simultaneously right now. Gas fired power plants are running harder as temperatures climb. Mexico is taking steady pipeline volumes. LNG terminals are shipping at historically strong rates despite some maintenance interruptions. I’ve watched this market get stuck for months waiting for one of those channels to move. Right now all three are moving at the same time and that is what turns a rangebound market into a trending one.
Weather Is Driving This
The forecast models shifted and the market moved before the heat arrived. Above-normal temperatures are spreading across the South, Midwest and parts of the East in the second half of May and carrying into early June. Air conditioning load does not have to actually arrive for June natural gas futures to move. Traders price what is coming. Four sessions of buying before a single hot day confirmed the forecast tells you how much conviction is sitting behind this move. They bought the forecast and four sessions of gains are the result.
What I’m Watching
The weather forecast holding hotter into late May is the fundamental driver. Production staying soft is the second piece. Both need to continue for this rally to hold.
The 50-day moving average at $2.936 broke clean today and is now support. Lose it and the pivot at $2.841 is the first test. Hold it and $3.107 becomes the wall this rally has to clear. Push through that level with real volume behind the move and $3.405 to $3.438 opens up where the long-term 50% level and the 200-day moving average converge.
