US Natural Gas futures fell 3.2% on Monday, pulling back from a near three-month high as Demand forecasts were trimmed and LNG export flows declined from April's record. Speculative short positioning and the US-China trade impasse add further pressure on near-term prices.

Key Highlights

  • Natural gas futures are trading down 3.2% to $3.1842 per mmBtu on Monday, pulling back from a near three-month high reached in the prior session.
  • Speculative net short positions climbed to their highest level since April 2024, even as prices gained 19% through May.
  • US LNG export feedgas flows declined to 17.1 bcfd in May from April's record of 18.8 bcfd, weighed down by seasonal maintenance.
  • Only one vessel is currently sailing directly from a US export terminal to China, reflecting the ongoing trade impasse between Washington and Beijing.
  • Total US gas storage stood approximately 5.9% above the five-year seasonal average as of late May, limiting upside price pressure.

A Rally Runs Into Resistance

Natural gas futures are trading sharply lower on Monday, giving back gains accumulated over a sustained May rally that lifted Henry Hub prices by nearly 19% across the month. Front-month July delivery on the New York Mercantile Exchange is down to $3.1842 per mmBtu, retreating from its highest level since early February. The pullback reflects a recalibration of near-term demand expectations rather than any material change in the broader Supply picture.

Total US demand for the current week is now forecast at 98.4 billion cubic feet per day, rising to 101.4 bcfd the following week as summer cooling loads build across major population centres.

Positioning Signals Caution Despite the May Surge

One of the more notable features of recent trading is the divergence between price direction and speculative positioning. Even as Henry Hub posted its strongest monthly gain in some time, traders on both NYMEX and the Intercontinental Exchange increased net short futures and Options positions to their highest level since April 2024, according to the US Commodity Futures Trading Commission's Commitments of Traders report.

This positioning pattern suggests a degree of scepticism about the durability of the rally. With storage running nearly 6% above the five-year seasonal average, the structural case for sustained price strength remains contested. Total inventories were forecast to reach approximately 2,583 billion cubic feet for the week ended May 29, comfortably above the prior year's comparable level of 2,581 bcfd.

LNG Exports and the China Constraint

Flows to the nine major US LNG export terminals averaged 17.1 bcfd in May, down from April's record of 18.8 bcfd. Scheduled maintenance at several facilities, including the Golden Pass plant jointly operated by ExxonMobil and QatarEnergy and Freeport LNG's Texas terminal, accounted for the bulk of the reduction. Output from Lower 48 dry gas production is holding steady at 109.8 bcfd for the current week, broadly in line with April levels.

The US-China trade dispute continues to cast a shadow over export demand. No LNG tanker has departed a US terminal bound directly for China since President Donald Trump's second term began in January 2025. Currently, a single vessel, the Al Sene, is en route from Venture Global's Plaquemines Facility in Louisiana to China, expected to arrive in late June. At its peak in recent weeks, as many as five vessels were simultaneously sailing that route.

China remains the world's largest gas importer, while the US holds the position of leading producer, consumer, and exporter. The continued absence of direct bilateral LNG trade between the two largest economies represents a structural constraint on US export utilisation that the market has not yet fully priced for a prolonged scenario.

Summer Heat as the Offsetting Variable

Meteorological forecasts offer some counterweight to bearish positioning. Above-normal temperatures are projected to persist across most of the continental US through mid-June, sustaining elevated power sector gas burn. Natural gas currently accounts for approximately 35% of weekly US electricity generation, with gas-fired capacity remaining the dominant source of flexible supply as solar and wind generation expand their share of the baseload mix.

Whether summer heat demand proves sufficient to tighten the storage overhang materially will be central to Henry Hub's price trajectory through the third quarter.