After one of the hottest Junes on record, the month of July turned out to be quite tame, with temperatures in most regions that are significant when it comes to natural gas consumption coming in cooler than normal.

With temperatures on the below side of normal from Texas up into most of the Midwest and East, natural gas demand from weather, as measured by our Gas-Weighted Degree Days (GWDDs) came in at their lowest level for July as a whole since July 2014.

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Given this weakness in demand, one might think, without looking, that there was pressure on natural gas prices over the last few weeks, an assumption that would be incorrect, as prices finished the month higher than where they started.

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Why such strength in the face of the weakest July in seven years, weather wise? Those who follow us know we stress that weather is far from the sole driver of price action other than in the winter months, where it certainly drives the bus, so to speak, and this rule certainly applies here. Yes, we lacked strong weather demand, but storage injections have for several weeks now been quite strong when adjusting for weather. Notice the trend line this year in recent weeks is lower than the trend lines from 2018 to 2020, indicating that, when normalizing weather conditions, we are injecting less gas into storage.

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The boom of exports driven by global demand is, of course, the big game-changer. That is keeping total supply (Production + imports - exports) well under levels seen in the last couple of years.

Data courtesy of Criterion Research, LLC.

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Until we see this year's supply make material gains, a bearish case is more difficult to construct, though at these higher prices, it would be surprising if we do not see some gains in natural gas.