July Nymex natural gas (NGN25) on Monday closed up by +0.167 (+4.66%).

July nat-gas prices on Monday rallied sharply as forecasts called for hotter temperatures in the eastern US, potentially boosting nat-gas demand from electricity providers to power increased air-conditioning usage.  Forecaster Atmospheric G2 on Monday said that near-record heat will encompass the eastern half of the US from June 21-25.

Nat-gas prices also had carryover support from a rally in European natural gas prices Monday to a 2-1/2 month high.  European gas rallied on supply concerns after Israel attacked Iran's South Pars gas field, forcing the halt of a production platform.  Also, there is concern that any attempt by Iran to close the Strait of Hormuz could disrupt LNG shipments through that Strait, which account for about 20% of global LNG trade.  In addition, Israel temporarily shut down its Leviathan gas field due to security concerns, which disrupted gas pipeline shipments to Egypt.

Lower-48 state dry gas production Monday was 105.8 bcf/day (+2.6% y/y), according to BNEF.  Lower-48 state gas demand on Monday was 69.5 bcf/day (+1.1% y/y), according to BNEF.  LNG net flows to US LNG export terminals Monday were 14.0bcf/day (+2.1% w/w), according to BNEF.

A decline in US electricity output is negative for nat-gas demand from utility providers.  The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended June 7 fell -2.7% y/y to 82,114 GWh (gigawatt hours), although US electricity output in the 52-week period ending June 7 rose +3.0% y/y to 4,246,137 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended June 6 rose +109 bcf, above expectations of +108 bcf and well above the 5-year average build for this time of year of +87 bcf.  As of June 6, nat-gas inventories were down -9.0% y/y and +5.4% above their 5-year seasonal average, signaling adequate nat-gas supplies.  In Europe, gas storage was 52% full as of June 10, versus the 5-year seasonal average of 62% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending June 13 fell by -1 to 113, falling back from the previous week's 15-month high of 114 rigs.  In the past nine months, gas rigs have risen from the 4-year low of 94 rigs posted in September 2024.