Outlook for Natural Gas Prices - June 11

[dan_s]

EBS Analytic Group.

Glimmers of Early-Summer Tightening Begin to Emerge

The July natural gas contract tested support at $3.515 yesterday as bulls began to lose
patience waiting for the demand ramp-up into summer. Henry Hub spot prices slid to
$2.75/MMBtu; Houston Ship Channel changed hands as low as $2.50. The next two EIA
storage reports may lift the storage surplus vs. five-year norm to 165 Bcf.

Weather is getting warmer for Week 3, adding 4 CDDs over the past 24 hours. The 1-15
day forecast added 9 CDDs since Friday, and more heat is possible in early July.

Slightly higher demand at Cameron LNG may signal the conclusion of the extended
maintenance outage. Another 1.6 Bcf/d may return at Sabine Pass within two weeks.

While building storage surpluses may question the durability of a short-term rally, the
combination of tightening near-term demand and a sound, structurally bullish long-term
narrative may offer upside for natural gas over the next 30-45 days.

We continue to position June as a potential turning point from a historically loose spring supply/demand balance into a structurally tight
summer. While bullish catalysts have been slow to emerge, the big picture may be slowly grinding higher—adding 9 CDDs since Friday and
Cameron LNG is finally exhibiting signs of exiting from a protracted 42-day-and-counting outage. While storage remains weak, Henry Hub
spot prices dismal at $2.75, and hints of bullish signs fragile, the next three weeks could still witness the vestiges of a bearish spring fall-off
as a structurally constructive summer rolls forward.

The US EPA will begin repealing regulations on power plants passed in the Biden Administration on carbon emissions and ratcheting
stands on mercury and air toxics standards (MATS). The novel EPA rule on carbon capture issued in the Biden era would require carbon
capture at new natural gas-fired capacity to capture at least 90% of carbon emissions starting by 2035 (or run at a sub-40% capacity
factor); coal plants would be required to install 90% carbon capture by 2032 or be forced to retire by 2038. The Mercury and Air Toxics
Standards would place increasing emissions restrictions on aging coal plants in particular. The attempted relaxation of restrictions by
the Trump Administration is hardly surprising—but will remain a contested legal battle. While a future Democratic administration will likely
reinstitute similar rules, the timetable for emission compliance will be pushed back at least 3-5 years. The widely anticipated deregulatory
push will have little immediate-term impact—requiring unproven carbon capture on new natural gas could have been overturned by the
courts on its own right—but loosening mercury stands could extend a long-term lifeline for coal plants.