Part of the explanation can be found on the supply side, with dry natural gas production exceeding 104 billion cubic feet per day in April, up nearly 8% y/y. The number of natural gas rigs continues to fall (down 20 this year to 135, as of June 9), but the supply growth slowdown is likely to come with a lag of several months in our view, as drilled but uncompleted wells (DUCs) still likely will be completed.

Concerns about storage in the US approaching capacity by October might rise again, particularly if the El Niño weather pattern results in milder temperatures in the US this summer, reducing power demand. Another concern might come on the export side. With European natural gas inventories potentially hitting their limits by late August/early September, this might weigh on European imports of Liquefied Natural Gas (LNG), eventually denting US LNG exports (they stood at record 12.6 billion cubic feet per day in April) and pushing up US inventories faster than seasonal patterns.

Hence, we retain a cautious outlook, and revised lower our US natural gas forecasts (all values in USD/mmbtu), with September now at 2.40 (was 2.50), December at 3.10 (was 3.25), March and June 2024 at 2.80 (previously 3.00).
Source: UBS