HG MARKETS:

U.S. natural gas stockpiles grew by 46 billion cubic feet last week, keeping overall storage levels above average for this time of year. However, despite this seemingly ample supply, natural gas traders remain cautious.

Total stored gas now stands at 3,052 billion cubic feet as of July 11th, which is 178 billion cubic feet more than the five-year average. Still, this is 156 billion cubic feet less than the unusually high levels seen last year.

While the current surplus offers a buffer, the market is closely monitoring if storage increases will slow down. This concern stems from record-breaking heat driving up power consumption and consistent demand from liquefied natural gas (LNG) export terminals.

Regionally, the Midwest and East saw significant additions to storage, but the South Central region only had a small increase, even with some gas being withdrawn from salt caverns. This withdrawal might be an early indicator that high air-conditioning demand is starting to impact supply.

Following the report, natural gas prices increased, with Henry Hub front-month futures rising over 1% to $3.591. The combination of persistent high temperatures, strong LNG exports, and tight pipeline maintenance schedules suggests that any future slowdown in storage builds could further tighten the market as August approaches.

For now, natural gas supply appears adequate on paper, and storage remains within the typical five-year range. However, if demand continues to exceed expectations, the current stable situation could quickly become more challenging. The next EIA report will be crucial in determining if current trends are sustainable.