Europe’s gas storage, while still trailing the seasonal norm at 45% full versus a 56% five-year average, offered minimal spillover support to U.S. benchmarks. The global picture continues to point toward adequate supply coverage heading into summer.
Production Remains Strong While Cash Markets and Rig Counts Signal Imbalance
Dry gas production in the Lower 48 averaged 107 Bcf/day on Friday, up 4.7% year-over-year, sustaining supply pressure even as regional constraints build. Spot prices in the Permian Basin turned negative, underscoring infrastructure bottlenecks and localized oversupply.
Meanwhile, active U.S. gas-directed rigs declined by 2 to 98 last week, per Baker Hughes, signaling a modest slowdown. However, the production pace remains elevated relative to demand, limiting the immediate bullish potential of a lower rig count.
Power Demand Picks Up, But Weather Still Caps Upside
A warmer shift in NOAA’s May 28–June 1 outlook sparked Friday’s short-covering, as the potential for increased cooling demand reentered the picture. Electricity output rose 2.5% y/y for the week ended May 17, according to the Edison Electric Institute, supporting expectations for higher gas-fired generation.
Still, current national weather patterns remain largely bearish. Below-average temperatures persist across the East and Midwest, with highs mostly in the 50s–70s. While the West and South remain hot, solar penetration is dampening gas demand from the power sector.
Outlook: Bearish Pressure Persists as Storage Builds and Demand Disappoint
The near-term outlook remains bearish. Storage injections continue to exceed seasonal norms, and production remains elevated at over 107 Bcf/day. Despite a modest uptick in electricity demand and a warmer shift in forecasts for early June, overall consumption is still underwhelming, particularly with mild temperatures limiting power burn in key demand regions.