Content for Topic 1: Henry Hub front-month prices rallied considerably across May, with the June contract settling at $2.49/mmbtu – over 50% above the lows witnessed in mid-February when mild winter temperatures weighed on prices. An upward trend in the On-Balance Volume (OBV) indicator, a technical measure of buying/selling pressure, reflects the presence of bullish trading volumes that have driven positive price movements.

The supply curtailment response across Q1 from shale producers has been a key factor in the recent price recovery – average daily dry gas production has declined by nearly 4% (4.6 bcf/d) since mid-February according to the EIA. This has partially mitigated storage congestion concerns although working stock levels (2,795 bcf) remain above the five-year maximum (2,641 bcf) as of May 31.

A combination of three factors will likely determine the durability of this recent price rally in the medium-term:

1. Shale production response: price-driven production curtailments in the Haynesville could be reversed in the coming months as prices normalize. Additionally, the start-up of the Mountain Valley pipeline along with the conclusion of Permian pipeline maintenance could represent non-price-related improvements in supply.
2. Summer cooling demand: growing expectations of above-average summer heat could drive higher domestic gas-burn requirements if manifest, countering the price impact of production increases.
3. LNG facilities: further disruption to construction and commissioning timelines for LNG export projects slated for start-up across 2024-2025 (particularly Golden Pass) would prompt a bearish shift in the domestic balance.

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