Natural gas futures slide 3.2% as weather forecasts cool demand outlook

Nymex natural gas futures tumbled 3.2% to settle at $3.229 per million British thermal units Friday, reversing gains from the prior two sessions as updated weather models pointed to milder temperatures across key demand regions. The front-month July contract posted a 1.9% weekly loss, snapping a two-week winning streak.

"Overnight and midday weather data shed several cooling degree days for the 9- to 15-day period, which seemed to be the catalyst for selling and profit-taking," NatGasWeather.com said in a note. The forecaster said the U.S. would likely see moderate demand through the weekend and "rather strong" demand from the middle of next week through the following week.

The pullback came despite supportive inventory data released Thursday that showed storage in the South Central region running 41 Bcf below the year-earlier level, according to Eli Rubin of EBW Analytics. "Continued regional tightening — even in the absence of heat — may remain a supportive factor for Nymex natural gas into early summer," Rubin said.

The reversal shows how sensitive the natural gas market remains to short-term weather shifts as the industry transitions from the spring shoulder season into summer cooling demand. With storage levels already tightening in key regions, the next several weeks will determine whether the market builds sufficient inventory to meet peak summer consumption or faces a supply crunch that could drive prices higher.

The selloff in natural gas occurred against a broader energy complex decline. Crude oil futures also fell Friday, with Nymex West Texas Intermediate crude sliding 2.7% to $90.54 a barrel and Brent crude dropping 2% to $93.09 a barrel, as traders bet on a resolution to the U.S.-Iran conflict that would reopen the Strait of Hormuz. The Energy Select Sector SPDR ETF (XLE) fell 2.4% on the session.

For the week, however, crude posted gains — Nymex WTI rose 3.6% and Brent added 2.2% — as the effective closure of the Strait of Hormuz continued to constrain global supply. Goldman Sachs estimated in a note Friday that global oil demand declined 4 million to 5 million barrels a day in April, representing a 4% to 5% reduction, driven by weaker consumption in China and Western Europe.

The divergence between crude and natural gas price action this week highlights the distinct supply-demand dynamics driving each market. While crude faces a geopolitical supply shock from the Strait of Hormuz closure, natural gas remains primarily a weather-driven market at this stage of the year, with storage levels and temperature forecasts dictating near-term price direction.

The storage picture provides a potential floor under prices. The South Central region's 41 Bcf deficit to year-ago levels suggests that even without extreme heat, the market is tightening. If summer cooling demand materializes as forecasters currently project for mid-June, the combination of below-average storage and rising consumption could push prices higher. Conversely, a sustained period of mild weather would keep inventories from drawing down, potentially pressuring prices back toward recent lows.

The last time natural gas storage in the South Central region ran a comparable deficit to year-ago levels was in early 2025, when prices responded with a 15% rally over a three-week period as traders priced in tighter supply. That historical precedent suggests the current storage deficit could provide meaningful support if demand picks up as forecast.

This article is for informational purposes only and does not constitute investment advice.