Natural gas futures recovered from early losses on Thursday, closing higher after the Energy Information Administration reported a smaller-than-expected increase in U.S. inventories. June Nymex natural gas (NGM26) settled at up +0.030 (+1.05%), reversing earlier weakness as traders reassessed supply dynamics.
EIA Storage Data Falls Below Expectations
The EIA reported that U.S. natural gas inventories rose by 85 billion cubic feet (bcf) for the week ended May 8, falling short of the 91 bcf build that analysts had anticipated. While the build was slightly above the five-year weekly average of 84 bcf, the miss relative to expectations provided a floor for prices that had been under pressure in recent sessions.
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Total working gas storage as of May 8 stood at roughly 2.6 trillion cubic feet, which is 1.6% higher than the same period last year and 6.5% above the five-year seasonal average. These levels still indicate ample supply, but the narrower-than-expected injection suggested that demand may be absorbing production more quickly than models had projected.
Warmer Weather Forecasts Bolster Demand Outlook
Weather patterns are emerging as a key near-term driver. The Commodity Weather Group noted Thursday that forecasts had shifted warmer, with above-average temperatures expected across the Midwest through May 18. This could increase electricity demand for air conditioning, which in turn supports natural gas consumption by power generators.
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U.S. electricity output for the week ended May 9 rose 2.2% year-over-year to 74,355 gigawatt hours, according to the Edison Electric Institute, reinforcing the narrative of steady power-sector demand.
Production and Supply Fundamentals
On the supply side, the EIA raised its 2026 forecast for U.S. dry natural gas production to 110.61 bcf per day, up from an April estimate of 109.60 bcf per day. Current production remains near record highs, with the active rig count reaching a 2.5-year peak in late February. However, Baker Hughes reported last Friday that the number of active U.S. natural gas drilling rigs fell by one to 129 in the week ending May 8, a modest pullback from the February high of 134 rigs.
Despite the near-term price rebound, the longer-term outlook remains tempered by abundant storage. As of late April, inventories were 7.7% above their five-year seasonal average, and prices touched a 1.5-year nearest-futures low on April 17 amid persistent surplus concerns.
Global LNG Disruptions Provide Underlying Support
International supply disruptions are adding a layer of support to U.S. natural gas markets. The closure of the Strait of Hormuz, tied to ongoing conflict in Iran, has curtailed Middle Eastern natural gas supplies to Europe and Asia. This has increased the likelihood of higher U.S. LNG exports to fill the gap.
Additionally, Qatar reported in March that attacks at the Ras Laffan Industrial City—the world’s largest natural gas export plant—caused extensive damage to 17% of its LNG export capacity. Repairs are expected to take three to five years. Ras Laffan accounts for roughly 20% of global LNG supply, and the capacity reduction could sustain demand for U.S. exports over the medium term.
European gas storage levels, currently at 36% full compared to the five-year seasonal average of 48%, also underscore the continent’s reliance on imported LNG, further supporting the case for U.S. exports.
Conclusion
Thursday’s price rebound reflects a market that remains sensitive to weekly inventory surprises and weather-driven demand shifts. While underlying supply is sturdy and production is near record levels, the combination of a smaller storage build, warmer weather forecasts, and structural disruptions to global LNG supply is providing a near-term floor. Traders will continue to monitor EIA weekly data, weather patterns, and geopolitical developments for direction in the weeks ahead.
FAQs
Q1: Why did natural gas prices rebound on Thursday?
The EIA reported a smaller-than-expected storage build of 85 bcf versus the 91 bcf consensus, which reduced immediate oversupply concerns. Warmer weather forecasts also boosted demand expectations.
Q2: How does the Strait of Hormuz closure affect U.S. natural gas?
The closure has curtailed Middle Eastern gas supplies to Europe and Asia, increasing the potential for higher U.S. LNG exports to compensate, which supports domestic prices.
Q3: Are U.S. natural gas inventories still high?
Yes. Inventories are 1.6% above last year and 6.5% above the five-year seasonal average, indicating ample supply despite the smaller-than-expected weekly build.
