Natural gas yesterday settled up by 2.36% at Rs 299.4, driven by expectations of stronger cooling demand and ongoing declines in US gas production. Weather forecasts suggested elevated temperatures across significant portions of the southern and eastern United States through midweek, leading to heightened demand from power utilities for air conditioning usage. The hotter weather outlook bolstered sentiment in the natural gas market, as electricity providers are anticipated to increase gas consumption for power generation during the peak cooling period. On the supply side, production faced ongoing challenges as various energy companies, including EQT, persisted in reducing output in response to consistently low spot market prices. Reduced domestic production levels offered further backing to prices.

Meanwhile, flows to major US LNG export facilities have decreased from the record monthly average of 18.8 bcfd in April to approximately 17.0 bcfd thus far in May, attributed to seasonal maintenance activities at facilities such as Golden Pass and Freeport LNG. Market sentiment, however, saw an uptick following reports indicating that three US LNG cargoes are anticipated to reach China in June. This development marks the first shipments of this kind since February 2025, suggesting a potential rebound in export demand. Inventory data exhibited a largely neutral stance. US energy firms injected 85 billion cubic feet of natural gas into storage during the week ended May 8, aligning with market expectations and closely approximating the five-year average build of 84 bcf.

Total gas inventories increased to 2.290 trillion cubic feet, representing a 2.3% rise compared to the previous year and a 6.5% increase relative to the five-year seasonal average. The US Energy Information Administration has projected a significant increase in gas production in the forthcoming years, with forecasts indicating that dry gas output will escalate from 107.7 bcfd in 2025 to 110.6 bcfd in 2026, and further to 115 bcfd in 2027. This growth is primarily attributed to heightened production activities in the Permian and Haynesville basins.

Technically, the market is experiencing new buying activity, as open interest has risen by 6.52% to reach 24356, while prices have increased by Rs 6.9. Natural gas is finding support at Rs 292.6; a decline below this level may lead prices to test Rs 285.9. Conversely, resistance is identified at Rs 303.2, with a potential upward movement likely to challenge Rs 307.1.