Natural gas prices clawed their way back above $3/MMBtu for the Henry Hub front-month futures price on June 10 after a heat spell followed earlier forecasts for a warmer-than-usual summer.

It was the first time the price had exceeded $3 since January 16. Natural gas was trading at $3.03 at the Henry Hub early June 11.

The weather may have provided a boost, but U.S. gas producers' actions are the primary reason the price of gas is recovering, said Alex Gafford, an energy analyst for East Daley Analytics.

“Recently, production cuts have been the biggest mover, forcing the market to become tighter over the last month,” Gafford told Hart Energy.

The analytical firm had forecast that gas prices would continue to rise going into winter, with an average of $3.55 during the cold months, peaking at $3.85 in January, he said.

In February, many U.S. gas producers cut production when natural gas prices hit about $1.50/MMBtu and stayed under $2 for the rest of spring. In the beginning of March, EQT, the U.S.’ largest gas producer, announced that it was cutting production between 30 Bcf/d to 40 Bcf/d. Chesapeake Energy cut its output by almost 20% in February.

TPH analyst Zack Van Everen noted that neither of the Appalachian-based producers has ramped up production recently.

“Looking at real-time flows, after bringing about 600 MMcf/d back, EQT has remained flat while CHK [Chesapeake] appears to be keeping both New England and Haynesville volumes shut in as regional spot prices remain depressed,” Van Everen wrote in a June 11 commentary.

Production has also steadily declined in the Haynesville Shale in Texas and Louisiana since March.

“Many producers appear to be deferring completions until market fundamentals improve further,” Van Everen wrote.

Since the spring, natural gas production fell or flattened in most basins, except for the Permian Basin, where natural gas is a by-product of crude production. The Permian added another 143 MMcf/d to production from April to May, the U.S. Energy Information Administration reported.

The National Weather Service reported on June 6 that a “heat dome” was sitting over much of the Western U.S., causing people to use more energy to keep cool. A heat dome is a non-moving high-pressure system that traps hot air underneath it.

The announcement followed an earlier forecast from the National Oceanic and Atmospheric Administration that most of the U.S. would experience a hotter-than-average summer.

The EIA reported in its monthly storage report that cuts in gas production have reduced the current level of natural gas in storage. By March, the overall level of natural gas in storage was 25% above the five-year average compared to 40% previously.

Overall, the EIA reported that the U.S. had 2.89 Tcf of natural gas in storage, a reduction of 98 Bcf from the week before.

“The next few months will be important to watch as late 2024 remains a key inflection point for gas fundamentals,” Van Everen wrote. “If storage draws below the five-year average by October (helped by the summer heat) it could create an interesting risk skew into winter, especially as it will take most upstream operators—with a few exceptions—six months to respond with supply to tightening fundamentals next year.”

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