US Natural Gas: A Summer of Scarcity and Profit

The US natural gas market is entering a critical juncture, where short-term supply-demand imbalances and surging LNG exports are set to create lucrative trading opportunities. With storage levels hovering near multi-year lows, rising export capacity, and summer demand peaking, the stage is set for a price rally. Investors who act now stand to capitalize on this volatile yet predictable dynamic.

The Storage Deficit: A Catalyst for Price Volatility

As of May 23, 2025, total US natural gas working inventories stood at 2,476 Bcf, 4% above the five-year average but 11% below year-ago levels (see Figure 1 below). This deficit is not merely a statistical quirk but a reflection of structural shifts.

Analysts project end-of-injection-season stocks to reach 3,670 Bcf—still 3% below historical norms. Even with robust weekly injections (e.g., 101 Bcf in late May), the market remains vulnerable to unexpected demand spikes or export surges. This tight balance suggests prices could jump sharply on any disruption, such as hotter-than-expected summer weather or geopolitical events impacting LNG flows.

LNG Exports: The Engine of Demand Growth

The real game-changer is LNG exports, which are projected to grow by 22% in 2025 and 10% in 2026. In the week ending May 28, 29 LNG vessels departed US ports, carrying 109 Bcf of gas—a record pace. Key destinations include Europe (57% of exports) and Asia (notably India, which plans to boost LNG imports by 15% this year).

The arbitrage opportunity is clear: US gas trades at $3.50/MMBtu, while European TTF prices hover near $12/MMBtu. This $8.50/MMBtu spread ensures exporters will prioritize US supplies, even as domestic storage tightens. New facilities like Plaquemines LNG Phase 1 and Corpus Christi Stage 3 will add 3.6 Bcf/d of capacity by year-end, further straining domestic inventories.

Summer Demand: The Final Piece of the Puzzle

The summer heating season is already underway, with Texas setting a May record for electricity demand (77.8 GW) due to soaring temperatures. The EIA forecasts 14% higher residential/commercial gas consumption and a 6% rise in power-sector use compared to 2024.

Hotter weather is not just a regional phenomenon. NOAA's June 2025 outlook calls for above-average temperatures across the Southwest and Midwest, amplifying demand. This perfect storm—low storage, high exports, and extreme heat—creates a textbook short squeeze scenario for natural gas prices.

Trading the Opportunity: Timing and Tactics

The June 5 EIA storage report will be a critical inflection point. If injections fall short of expectations (e.g., below 100 Bcf), prices could surge to $4.50/MMBtu within days. Investors should:

1. Go Long on Futures: Buy July 2025 Henry Hub contracts (currently at $3.55/MMBtu) with a stop-loss at $3.20.
2. Leverage ETFs: Use UNG (daily natural gas ETF) or BOIL (3x leveraged) for amplified returns.
3. Play the Spread: Short European gas futures (e.g., TTF) while long US gas to capture the widening price differential.

Risks and Mitigation

The primary risk is a cooling summer, which could depress demand. However, weather forecasts and historical data suggest this is unlikely. A second risk is rig count recovery—if drillers ramp up activity, production could offset the deficit. Yet, with rig counts down 34% year-over-year and shale wells increasingly capital-efficient, this remains a low-probability outcome.

Conclusion: Act Now or Miss the Rally

The math is undeniable: constrained storage, soaring exports, and peak summer demand are aligning to create a once-in-a-decade short-term opportunity in natural gas. With prices poised to climb toward $4.80/MMBtu by year-end, investors ignoring this trend risk missing substantial gains.

The clock is ticking—position yourself before the June 5 report triggers the next leg of this rally.