U.S. natural gas futures climbed to a seven-week high on Friday, with benchmark prices reaching $2.96 per million British thermal units (mmBtu), as traders reacted to declining production and warmer weather forecasts that signal increased cooling demand.
The latest data from the U.S. Energy Information Administration (EIA) showed underground gas storage increased by 85 billion cubic feet (Bcf) for the week ended May 8, bringing total working gas to 2,290 Bcf. This injection fell short of the 91 Bcf expected by analysts, offering support to prices. Inventories remain 51 Bcf above year-ago levels and 140 Bcf above the five-year average.
The Commodity Weather Group highlighted a shift toward warmer temperatures in the Midwest through May 18, which could drive higher gas use for power generation as air-conditioning demand picks up. This early-summer heat is arriving just as the market exits the spring shoulder season, a period typically characterized by low demand.
Analysts have pointed to the potential for seasonal upside. Eli Rubin of EBW Analytics noted that the start of summer often brings upward price pressure. Andy Huenefeld of Pinebrook Energy Advisors added that lower-priced 2026 gas contracts are encouraging increased gas-fired generation, further boosting demand.
Despite the rally, the bull case faces headwinds. The EIA's May Short-Term Energy Outlook projects U.S. dry natural gas production will rise to 110.61 Bcf per day in 2026, up from 107.65 Bcf/d in 2025. Storage builds are expected to remain above average through the April-October injection season, with inventories projected to close the season 7% above the five-year average. The EIA forecasts Henry Hub prices averaging $2.83/mmBtu in the second quarter.
The mixed outlook has implications for producers such as EQT Corporation and integrated energy majors like Exxon Mobil. Higher Henry Hub prices can boost upstream revenues, but the impact is often tempered by hedging strategies, oil-linked volumes, and regional price differentials. For LNG-focused companies like Cheniere Energy, robust export demand continues to counterbalance ample domestic supply. The EIA estimates U.S. LNG exports will average 17.0 Bcf/d this year.
Prediction markets reflected the bullish sentiment, albeit with thin liquidity. On Kalshi, contracts indicated a 92% probability that natural gas would settle above $2.899 by 5 p.m. EDT Friday, while odds for a close above $2.999 stood at 16%, with total volume of $17,577. On Polymarket, the probability of natural gas closing higher on May 15 was 92%, with about $3,000 traded. Another contract showed an 89% chance of prices reaching $3.00 at some point in May.
The rally remains fragile. A recovery in production, a drop in LNG feedgas demand, or a shift to cooler weather could quickly bring the storage surplus back into focus, capping further gains. For now, the market is driven by a delicate balance: production has slipped, weather offers some support, and the latest storage build was not enough to trigger selling pressure.
