Natural gas futures retreated in early trading on Tuesday, with the July NYMEX contract declining 1.9 cents, or 0.6%, to settle at $3.234 per million British thermal units as of 5:03 a.m. EDT. The pullback erased a portion of Monday's gains as robust supply levels overshadowed weather-driven demand expectations.
On Monday, July natural gas contracts had advanced 0.6% to close at $3.253, as the market weighed the first significant heat wave of the summer against elevated storage levels. Warmer-than-normal forecasts for July are expected to boost demand from power generators, but the market remains cautious given the ample supply cushion.
The U.S. Climate Prediction Center on Monday indicated a heightened probability of above-normal temperatures across regions east of the Rockies from June 28 through July 2. The agency also flagged early signs of a broader heat wave expected from June 30 through July 6, which could drive increased air conditioning usage and, consequently, higher demand for gas-fired electricity.
Analysts at EBW Analytics, in a note cited by The Wall Street Journal, highlighted the ongoing tug-of-war between bullish weather patterns and rising supply. While liquefied natural gas (LNG) feedgas demand has recovered, higher production levels have so far capped any significant price appreciation.
U.S. natural gas inventories rose by 73 billion cubic feet in the week ending June 12, according to the Energy Information Administration (EIA). Total storage now stands at 2,759 billion cubic feet, which is 151 billion cubic feet, or 5.8%, above the five-year average. However, stocks remain 29 billion cubic feet below the level seen at the same time last year.
The pullback extended across the futures curve. The August contract slipped 1.4 cents to $3.265 per mmBtu, while September gave up 1.1 cents to $3.223. Traders were active across the front of the curve, selling positions amid the supply-driven pressure.
In Europe, the benchmark Dutch TTF gas contract edged 0.3% lower, trading near €41.77 per megawatt-hour, according to data from Trading Economics. The easing of global supply concerns followed remarks from Qatar's energy minister, who confirmed that the explosion at a domestic gas-processing facility over the weekend had not impacted LNG plants, port operations, or export capacity at Ras Laffan.
Market participants are now turning their attention to the next EIA storage report, scheduled for release on Thursday, June 25, at 10:30 a.m. Eastern Time. The weekly data will serve as a key catalyst for near-term price direction.
If hotter weather persists or expands, it could lead to smaller weekly storage builds and stronger power-sector demand, potentially driving prices higher. Conversely, cooler forecasts or further increases in output could boost storage injections, while above-average inventories continue to provide a supply buffer, exerting downward pressure on prices.
