Is Oversupply from Storage and Output Keeping Bulls on the Sidelines?
Last week’s storage injection came in at 120 Bcf, significantly higher than the five-year average of 87 Bcf. This marks the second week in a row of triple-digit builds and pushes inventories to 2,375 Bcf—now 3.9% above the five-year average. The year-on-year storage deficit narrowed to 12.7%, underlining how persistent supply growth is outpacing consumption.
Production remains elevated, with Lower 48 dry gas output averaging 107 Bcf/day—nearly 5% higher year-on-year. While gas-directed rig counts have fallen slightly, infrastructure constraints in high-output regions like the Permian are causing regional pricing dislocations, including negative spot prices. These conditions suggest little near-term relief from the supply side.
Can Power Burn or LNG Support Stall Further Losses?
Electricity demand showed modest gains, rising 2.5% year-over-year for the week ending May 17, per Edison Electric Institute data. NOAA’s early June outlook hints at warmer conditions, which could spark higher cooling demand and provide some short-term support. However, much of the East and Midwest remains under temperate weather, limiting widespread power burn.
Solar generation continues to displace gas in key regions, especially the western U.S., and that trend further pressures demand for gas-fired generation. LNG exports and pipeline flows to Mexico are holding steady, but their growth remains too slow to offset the oversupply picture.
