Summer Heat Strains Natural Gas Supply

​Temperatures have been soaring in the US and natural gas futures prices have been soaring in tandem with this. Prices reached $4 per million British thermal units in the U.S. for the first time since December 2018. The summer heat is raising concerns about tight supplies later this year. 

​​The March/August spread is now at a premium of 62.9 cents and this tells us that the market is under-supplied with high demand. Prices for natural gas are soaring across the globe as hot weather has people reaching for the air conditioners and cranking them up a notch. So the rally is primarly driven by the heat. Temperatures are expected to soar to 101 Fahrenheit (38 Celsius) in Dallas as soon as Monday, the National Weather Service said, breaking the 100-degree mark for the first time this year.

However, in the U.S., the rally is also underpinned by concern about a potential supply shortfall in the winter, when gas consumption peaks as homes and businesses turn up the heat. Natural gas stocks are already below nornal for this time of year and this comes at a time when we are seeing supply constraints.

Exports are also contributing to tight gas supplies. In May, the U.S. shipments of liquefied natural gas (LNG) exceeded Australia’s for the first time ever as buyers around the world continued to purchase record amounts of LNGl. IN addtion, we also delvieries to Mexico from the U.S. via pipeline reach record highs in the following month. 

In the U.S. gas in underground storage is 6.2% below normal for the time of year, according to government data. The market is set to head into the winter with the least amount of gas in storage we've seen in many years.