U.S. natural gas futures staged a sharp rebound on Monday, climbing approximately 5% to touch a one-week high. This resurgence came in light trading ahead of the May contract’s expiration, fuelled by a stronger-than-expected demand outlook for the coming week. Despite this rally, the underlying market remains technically oversold for an eighth consecutive session, a milestone not seen since February 2024, hinting at deeply ingrained bearish sentiment that could yet provide fertile ground for contrarian investors.
Earlier in the session, futures had dipped about 2%, hitting a five-month low as rising production levels and forecasts for mild weather through mid-May weighed on sentiment. These conditions were anticipated to suppress both heating and cooling needs, creating a scenario where utilities could continue stockpiling gas at an accelerated pace.
At mid-morning in New York, May futures were trading up 15.1 cents at $3.09 per million British thermal units. The coming front-month contract, June delivery, surged even more impressively, gaining around 6.5% to reach $3.31 per MMBtu. This upswing offers investors a glimpse into the volatile, opportunity-rich environment that defines natural gas markets.
One major headwind over recent weeks has been the rapid replenishment of U.S. gas storage. Following a period where inventories dipped below historical averages in January, accelerated injections have positioned stockpiles to soon surpass the five-year norm. This structural shift comes after a cold snap in early 2024 bolstered consumption, briefly tightening supplies.
Speculative activity has also responded to the prevailing bearish tide. Hedge funds and other money managers have pared back their net long positions in gas futures and options for seven straight weeks, driving holdings to their lowest level since January. This systematic retreat reflects cautious investor positioning, although it may also prime the market for sharp reversals should sentiment improve.
On the supply side, the story remains one of robust growth. Financial data provider LSEG reported that natural gas output across the Lower 48 U.S. states has averaged 106.5 billion cubic feet per day so far in April, up from the previous record of 106.2 Bcf/d set in March. Mild temperatures are forecast to persist into mid-May, with meteorologists expecting conditions to remain predominantly warmer than usual.
Demand projections, however, have offered a subtle note of resilience. LSEG has raised its forecast for this week’s average gas consumption to 99.2 Bcf/d, although expectations for next week have been trimmed slightly to 97.4 Bcf/d. The near-term upward revision suggests that consumption is holding firmer than many anticipated, underpinning Monday’s rally.
Meanwhile, the U.S. liquefied natural gas (LNG) sector continues to be a critical growth engine. Average gas flows to America’s eight major LNG export terminals rose from 15.8 Bcf/d in March to 16.0 Bcf/d so far in April. This increase has been propelled by rising shipments from Venture Global’s Plaquemines facility in Louisiana, a major new addition still under construction. America’s position as the world’s largest LNG exporter, solidified in 2023, underscores the strategic importance of export demand even amid fluctuating domestic conditions.
Globally, gas prices remain subdued, with European and Asian benchmarks trading around nine to eleven-month lows. Nevertheless, America’s capacity to supply key international markets offers a vital release valve for domestic production surpluses, ensuring that U.S. gas fundamentals remain linked to global energy security narratives.
Diversified Energy Company plc (LON:DEC) is an independent energy company engaged in the production, marketing, transportation and retirement of primarily natural gas and natural gas liquids related to its U.S. onshore upstream and midstream assets.
