U.S. natural gas futures fell sharply on Wednesday as traders looked beyond this week’s Mid-Atlantic heat wave and focused on milder weather, lower holiday demand and a steep drop in oil prices. After rising for five straight sessions, front-month natural gas futures for June delivery on the New York Mercantile Exchange declined 11.0 cents, or 3.5%, to settle at $3.004 per million British thermal units.
The pullback came one day after the contract closed at its highest level since March 19. The decline shows how quickly sentiment can shift in the natural gas market when short-term weather demand begins to fade.
Natural gas had rallied earlier in the week as record heat lifted air-conditioning use across the Mid-Atlantic region, especially in Washington, D.C., and the broader PJM power market. But forecasts now show temperatures easing sharply, which should reduce power-sector demand after the latest spike.
At the same time, crude oil prices dropped around 6% after President Donald Trump said negotiations with Iran were in the “final stages.” Lower oil prices added pressure to energy markets broadly, reducing part of the risk premium that had supported commodity prices in recent weeks.
Heat-Driven Rally Loses Momentum
The latest move in natural gas was largely a weather-driven reversal. Earlier in the week, extreme heat pushed homes and businesses to increase air-conditioning use, lifting gas-fired power demand.
Washington, D.C., was on track to reach 96 degrees Fahrenheit on Wednesday after hitting a record-breaking 97 degrees on Tuesday. That compared with a normal high of around 77 degrees for this time of year.
The heat wave had a strong impact on regional power markets. PJM West power prices surged earlier this week to $229 per megawatt-hour, the highest since January. PJM manages the grid across all or parts of 13 states from New Jersey to Illinois, making it one of the most important power markets in the United States.
But the temperature outlook changed quickly. Washington was expected to drop to 70 degrees on Thursday and 61 degrees on Friday and Saturday. That shift from extreme heat to spring-like weather weakens the immediate case for stronger gas demand.
Natural gas traders often react aggressively to weather changes because power burn can move quickly. When temperatures spike, gas demand can surge. When temperatures normalize, that demand can disappear just as fast.
Memorial Day Weekend May Reduce Demand
The upcoming Memorial Day holiday weekend also added pressure to prices. Long weekends can reduce industrial and commercial energy use as businesses close, factories slow operations and office buildings consume less power.
Even if residential cooling demand remains present in some regions, lower commercial and industrial consumption can reduce total gas demand.
LSEG projected average U.S. Lower 48 gas demand, including exports, would slide from 98.3 billion cubic feet per day this week to 97.8 bcfd next week. That decline is not dramatic, but it reinforces the idea that demand may ease after the heat wave.
The holiday effect is especially important because natural gas had already moved higher for five consecutive sessions. Once traders saw signs that demand would soften, profit-taking became more likely.
Oil Drop Adds Pressure to Natural Gas
Natural gas prices were also pressured by a sharp drop in crude oil. U.S. crude and Brent both fell around 6% after Trump said Iran negotiations were in the final stages.
Oil and natural gas are different markets, but they can influence each other through broader energy sentiment. When oil falls sharply, it can pressure energy-sector positioning and reduce inflation-risk buying across commodities.
The Iran conflict has been a major driver of energy volatility this year. Oil prices have been supported by concerns over supply disruptions, maritime risks and the effective closure or restriction of key routes such as the Strait of Hormuz.
When traders see signs of diplomatic progress, oil prices often fall as the geopolitical risk premium eases. That pressure can spill over into natural gas futures, especially when weather demand is also turning less bullish.
For natural gas, the oil decline was not the only factor, but it amplified the reversal.
U.S. Gas Output Remains Below Record Levels
Despite Wednesday’s price decline, the supply side is not entirely bearish. LSEG reported that average gas output in the U.S. Lower 48 states fell to 109.3 bcfd so far in May. That is down from 109.8 bcfd in April and below the monthly record of 110.6 bcfd reached in December 2025.
Lower production can support prices, especially during periods of strong power demand. However, the market is currently balancing that lower output against softer near-term demand and reduced LNG export flows due to maintenance.
The latest LSEG supply forecast showed Lower 48 dry production at 109.5 bcfd this week and 110.0 bcfd next week. If production continues to recover, that could limit price upside unless demand strengthens again.
For traders, the key question is whether production remains below recent records or returns toward the highs seen at the end of last year.
LNG Export Flows Remain Reduced
Liquefied natural gas export demand is another major factor. Average gas flows to the nine major U.S. LNG export plants fell from a monthly record of 18.8 bcfd in April to 17.0 bcfd so far in May.
The decline is linked to spring maintenance at several plants, including ExxonMobil and QatarEnergy’s Golden Pass facility and Freeport LNG in Texas.
LNG feedgas demand is expected to recover somewhat next week, with LSEG projecting flows at 17.2 bcfd compared with 16.7 bcfd this week. Still, current flows remain below April’s record level.
This matters because LNG exports have become one of the most important structural drivers of U.S. natural gas demand. When export plants are running near full capacity, they pull more gas from the domestic market. When maintenance reduces flows, more supply remains available within the United States.
That additional domestic availability can weigh on futures prices, especially when weather demand weakens.
Storage Levels Remain Above Average
Storage also plays a major role in market sentiment. U.S. natural gas storage was forecast to increase by 85 billion cubic feet for the week ended May 15, matching the prior week’s actual injection.
Total U.S. gas in storage was forecast at 2,375 bcf, compared with 2,358 bcf a year earlier and a five-year average of 2,242 bcf. That places inventories 5.9% above the five-year average.
Above-average storage gives the market a cushion. It reduces the urgency to price in a supply shortage unless demand rises sharply or production falls further.
However, the storage surplus has narrowed from 6.5% above the five-year average in the previous week to 5.9%. If hot weather returns and storage injections weaken, the market could become more supportive again.
For now, storage is not tight enough to sustain a strong bullish move without help from weather or LNG exports.
Power Market Reaction Shows Weather Sensitivity
The sharp movement in PJM power prices earlier this week shows how weather-sensitive the U.S. power market has become. PJM West next-day prices surged to $228.78 per megawatt-hour before falling to $110.37 as the weather outlook cooled.
That remains above typical levels, but the drop confirms that the market was pricing in temporary heat stress rather than a permanent demand shock.
Natural gas remains a key fuel for U.S. power generation. The latest weekly power-generation mix showed natural gas accounting for 35% of U.S. electricity generation, with coal at 14%, nuclear at 19%, wind at 17%, solar at 8% and hydro at 6%.
When heat rises, gas-fired power plants often become essential to meet cooling demand. But if temperatures moderate, the need for incremental gas burn can ease quickly.
Regional Gas Prices Show Mixed Conditions
Regional gas markets remained uneven. Henry Hub next-day gas rose to $3.23 from $3.07, even as futures declined. Transco Zone 6 New York was nearly flat at $2.39, while Algonquin Citygate in New England fell to $2.57 from $2.99.
In the West, prices remained weak in some hubs. Waha Hub in West Texas stayed negative at minus $2.73 per mmBtu, although that was an improvement from minus $3.21 the prior day. Negative Waha prices often reflect pipeline constraints and excess associated gas production in the Permian Basin.
These regional differences show that the U.S. gas market is not uniform. Local weather, infrastructure constraints, production flows and pipeline capacity all influence hub-level prices.
For national futures, however, the main focus remains broader Lower 48 demand, storage, production and LNG export activity.
Global Gas Prices Stay Elevated
Global gas prices remain much higher than U.S. Henry Hub prices. The Dutch Title Transfer Facility traded around $17.30 per mmBtu, while the Japan-Korea Marker rose to $19.61.
This wide gap highlights the value of U.S. LNG exports. International markets continue to price gas far above U.S. domestic levels, which supports long-term demand for American LNG.
However, short-term maintenance reduces the ability of U.S. exporters to fully capture that global price spread. Until LNG feedgas flows return closer to record levels, domestic gas prices may receive less support from export demand.
What Traders Should Watch Next
The first factor to watch is the weather forecast. If cooler temperatures persist into the Memorial Day weekend, gas demand may remain under pressure. If forecasts turn hotter again, prices could recover quickly.
The second factor is LNG feedgas. A recovery in flows to export plants would tighten the domestic balance and support prices.
The third factor is production. If Lower 48 output rises back toward 110 bcfd or higher, supply concerns may ease. If output remains below recent records, downside could be limited.
The fourth factor is storage. Above-average inventories are bearish, but a shrinking surplus would be supportive if summer demand accelerates.
The fifth factor is oil. If crude continues to fall on Iran diplomacy, broader energy sentiment may remain soft. If talks fail and oil rebounds, natural gas could regain some risk-premium support.
The natural gas market is shifting from heat-driven strength to demand uncertainty. The rally earlier in the week was supported by record Mid-Atlantic temperatures and strong power burn. But milder weather, the Memorial Day holiday and weaker oil prices quickly reversed momentum.
The June contract’s drop to $3.004 per mmBtu shows that traders are not yet convinced the market is tight enough to sustain a larger rally.
Still, the bearish case is not overwhelming. Output remains below December’s record, LNG demand could recover after maintenance and storage surpluses are narrowing. The market is therefore more balanced than the daily price move suggests.
U.S. natural gas futures fell about 4% after a five-day rally as milder weather forecasts, lower holiday demand and a sharp drop in oil prices pressured the market. The June contract settled at $3.004 per mmBtu after reaching its highest level since March 19 one day earlier.
The decline reflects a quick shift in weather expectations. Extreme heat lifted power demand earlier in the week, but temperatures are expected to fall sharply in Washington, D.C., and across parts of the Mid-Atlantic.
Lower LNG export flows and above-average storage also limit the bullish outlook, even though production remains below record levels.
For now, natural gas remains a weather-sensitive and data-driven market. Traders will focus on forecasts, LNG feedgas, storage injections, production trends and oil-market sentiment to determine whether the latest pullback is a temporary reset or the start of a deeper correction.
