Natural gas prices experienced a notable decline of 4.52%, closing at Rs 277, driven by forecasts indicating milder weather conditions and anticipated weaker demand in the near term. Market sentiment continued to face challenges following revised weather forecasts that suggested cooler temperatures for the upcoming week, which in turn diminished the anticipated cooling demand from the power generation sector. Additional weakness stemmed from elevated storage levels and higher-than-anticipated inventory injections, underscoring apprehensions regarding the sufficiency of supply in the US market.
According to the Energy Information Administration, US energy firms injected 101 billion cubic feet of natural gas into storage during the week ended May 15, surpassing market expectations of a 95-bcf build and remaining above the five-year average increase of 92 bcf for the same period. Total petrol inventories rose to 2.290 trillion cubic feet, reflecting a 2.3% increase compared to the previous year and a 6.5% rise above the five-year seasonal average, indicating a favourable supply situation as the summer demand season approaches. Further pressure also emerged from subdued LNG export activity.
Gas flows to major US LNG export terminals decreased from a peak of 18.8 bcfd in April to approximately 17.0 bcfd in May, attributed to seasonal maintenance activities at facilities such as Golden Pass LNG and Freeport LNG. However, some downside remained limited after reports indicated that three US LNG cargoes are expected to arrive in China during June, marking the first such shipments since February 2025. Longer-term fundamentals exhibited a mixed outlook, with the EIA forecasting US dry gas production to reach unprecedented levels of 110.6 bcfd in 2026 and 115.0 bcfd in 2027.
In contrast, domestic demand is anticipated to experience a slight decline next year before staging a recovery in 2027. Technically, the market is experiencing long liquidation, evidenced by a 14.12% decline in open interest to 10,666 lots, alongside a price drop of Rs 13.1. Natural gas is maintaining support at Rs 272.4, with a probable decline towards Rs 267.8, while resistance is identified at Rs 285.4 and Rs 293.8 levels.