Supply shortage fuels optimistic sentiment
Recent market movements have been largely influenced by weather forecasts. Earlier in the week, high temperatures in the western and southern US, with highs ranging from 86°F to over 100°F, drove strong demand. However, mid-week forecasts of cooler weather in the Northeast and Midwest reduced expected demand. Despite these forecasts, the possibility of a rise in temperatures in the second half of August keeps the market on alert.
At the same time, supply conditions have supported an optimistic forecast for natural gas prices. The US Energy Information Administration (EIA) reported a rare mid-summer gas draw, the first in August since 2006. This draw reflects increased cooling needs during high temperatures and indicates a tightening supply-demand balance. In addition, lower gas production volumes have further supported the market. Production was reported at 100.6 Bcf/d, a level that usually pushes prices lower.
Investments are declining, geopolitical tensions are increasing
In addition to weather and supply factors, the natural gas market also faces lower capital spending and ongoing geopolitical tensions. The investment decline has delayed the development of new projects, while conflicts in Ukraine and the Middle East continue to disrupt global supply chains. Although Europe has increased its dependence on US liquefied natural gas (LNG) imports, the future of Russian gas supplies to Europe remains uncertain, making the market outlook even more complex.
