LNG Is Doing the Heavy Lifting
Feedgas flows to U.S. export terminals are near 17.3 Bcf per day and I want to be direct about what that means. Most traders look at that number and move on. I look at it and see a sustained pull on domestic supply that is not letting up. Not a one-week spike. Not a weather-driven bump. Consistent historically strong volume leaving the domestic market session after session. Golden Pass LNG and the Corpus Christi Stage 3 expansions are adding to that draw as new capacity comes online. They are running.
The global picture is feeding them. Qatar’s Ras Laffan facility is still operating at reduced capacity and the Strait of Hormuz situation has European and Asian buyers looking for supply they can count on. U.S. terminals are the obvious answer and the flow data is confirming it. Buyers who spent years treating Middle Eastern LNG as a fixed part of their supply chain are now moving volume toward the Gulf Coast because they do not have a better option. That demand is real, it is consistent and it is showing up in the feedgas numbers every week.
Heat Is Starting to Show Up
The Great Lakes, Ohio Valley and Northeast are still running cooler than normal through May 18 and that is keeping national demand moderate. But California, the Southwest deserts and West Texas are a different story. Temperatures are climbing and air conditioning load is rising with them.
The Edison Electric Institute reported U.S. electricity generation up 2.2% year-over-year in the latest reporting week. That power burn increase is showing up at exactly the right time for the bulls. If heat expands deeper into major population centers over the next few weeks the demand picture changes fast and the storage builds start shrinking.
Production Is Still the Problem
U.S. dry gas output is running near 109.8 Bcf per day. Storage is sitting 6.7% above the five-year average. The Baker Hughes rig count is still near multi-year highs despite a slight weekly decline. Those three facts are the reason every rally in June natural gas futures has stalled in the upper $2.80s and low $3.00 area.
Production has been too strong to let bulls build a sustained case and until that changes the upside is capped. The support base that has been building since the spring lows is real and it is more impressive than it looks given the supply backdrop. But a support base is not a breakout and the market needs a catalyst to push through the 50-day moving average with conviction.
