Natural gas remains range-bound as LNG demand and record supply offset each other

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Natural gas remains range-bound as LNG demand and record supply offset each other

Storage data keep the short-term bias constructive

The latest EIA report also continues to work in favor of buyers. For the week ended August 14, inventories increased by only 16 Bcf compared with the five-year average build of around 29 Bcf, while total gas in storage reached 3.169 Tcf. The surplus versus the five-year average narrowed to 185 Bcf, or about 6.2%, while inventories are already 28 Bcf below last year’s level.

The next report will be released on August 27, and one of S&P Global Gaslytics’ models points to another small build of around 18 Bcf for the week ended August 21. If the actual figure again comes in well below the seasonal norm, the market will receive further confirmation that summer demand is indeed accelerating the reduction of excess inventories. However, the EIA still expects around 3.985 Tcf by the end of October, the highest pre-winter level since 2016, so it is still too early to speak about a supply deficit.

LNG flows become a more important price driver

LNG is becoming a more interesting driver. After part of the maintenance work was completed, feedgas flows recovered to around 17.5 Bcf/d, while the EIA’s August forecast assumes LNG exports in the third quarter will average around 16.5 Bcf/d. At the same time, the global price gap has widened sharply: European TTF has risen to its highest levels in more than three years, while Asian JKM also remains elevated amid competition between Europe and Asia for available LNG cargoes.

This significantly improves the economics of U.S. gas exports and creates a potential mechanism for a faster reduction in domestic inventories this autumn. Nevertheless, record U.S. production remains the main counterweight to this factor, while the EIA still forecasts an average Henry Hub price of only around $2.87/MMBtu in the third quarter.

Hormuz risks strengthen the case for U.S. LNG

The Middle East is currently affecting Henry Hub much more through the global LNG balance than directly through U.S. supply. Tensions around the Strait of Hormuz have intensified: Iran has warned dozens of vessels about possible fines, detention, or confiscation for violating new transit rules, while the number of passages through the strait has fallen sharply compared with pre-war levels.

For the gas market, disruptions to Qatari LNG and risks around Ras Laffan are especially important, since a significant share of global LNG supplies previously passed through Hormuz. Therefore, if restrictions remain in place, U.S. LNG gains an additional competitive advantage.

For NATGAS, the nearest key resistance level remains $2.90, and only a breakout above it, as I warned in Natural gas holds above key support as storage surplus narrows, would increase the chances of a move toward $2.95-3.00, while a return below $2.72-2.70 would again shift the balance in favor of sellers and open the way toward $2.62-2.60.

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