U.S. natural gas futures retreated on Friday, snapping a two-day winning streak, as updated weather forecasts reduced expectations for cooling demand. The July contract on the New York Mercantile Exchange settled at $3.229 per million British thermal units, down 3.2% for the session. For the week, the contract posted a 1.9% decline.
The pullback comes after a brief rally earlier in the week, fueled by a smaller-than-expected storage build and a brief shift in weather models toward hotter temperatures. However, those gains evaporated as meteorologists revised their outlooks, trimming the number of cooling degree days in the 9- to 15-day forecast. NatGasWeather.com reported that both overnight and midday model runs cut several cooling degree days, reducing expectations for heat-driven air-conditioning use.
Market participants are now closely watching whether sustained heat and rising exports can offset near-record domestic production and ongoing maintenance at liquefied natural gas (LNG) export facilities. The U.S. Energy Information Administration reported a storage injection of 95 billion cubic feet for the week ended May 29, which fell short of both market expectations and the five-year average. That left inventories at 2.578 trillion cubic feet, 138 Bcf (5.7%) above the five-year norm but 3 Bcf below the year-ago level. The surplus has narrowed, offering some support to prices.
LNG flows have been volatile this week. Feedgas deliveries to major U.S. LNG export terminals dropped to their lowest in four months as spring maintenance curtailed output at plants including Golden Pass, backed by Exxon Mobil and QatarEnergy, and Freeport LNG in Texas. Average feedgas volumes to the nine largest U.S. LNG export terminals fell to 16.0 Bcf per day in June so far, down from 17.1 Bcf per day in May and a record 18.8 Bcf per day in April, according to Reuters data.
U.S. LNG exports declined to 10.2 million metric tons in May, the lowest level so far this year except for February, as maintenance work hit several plants. Cheniere Energy's Sabine Pass, Freeport LNG, Cameron LNG, and Golden Pass all reported outages or reduced gas intake due to planned work or commissioning activities. Europe remained the largest buyer of U.S. LNG in May, while Asian demand hit a one-year high as Japan-Korea Marker prices stayed above Europe's TTF benchmark.
Despite the near-term headwinds, some analysts see potential for continued support into early summer. EBW Analytics' Eli Rubin noted in a report that Nymex natural gas could find support if regional markets continue to tighten, even without weather-driven demand. However, the rally remains fragile. A shift to cooler weather, further LNG feedgas curtailments, or higher domestic output could quickly rebuild storage surpluses and pressure prices.
Lower 48 dry gas production reached 108.7 Bcf per day on Thursday, a 1.8% increase from a year ago, according to Barchart. The EIA has raised its U.S. dry gas production estimate for 2026. The combination of near-record output and maintenance-driven LNG demand weakness creates a challenging backdrop for bulls.
Traders now face a market that is tighter than a month ago but still not undersupplied. The narrowing storage surplus provides some cushion, but the next round of weather forecasts will be critical in determining whether Friday's decline was merely profit-taking or the start of a more sustained sell-off. As summer demand season approaches, the balance between heat, exports, and production will dictate price direction.
