Natural gas markets within the U.S. and Europe are grappling with a messy interplay of seasonal demand softness, supply limitation, and changing policy dynamics during early May 2025. Although U.S.  natural gas futures are bearing bullish undertones underpinned by export strength and regional inventories tightness, European benchmarks are subdued under policies altering storage and robust renewable generation.

U.S. natural gas futures began the month on stronger ground but ran into technical resistance close to a crucial price pivot, which indicates hesitation based on muted weather-driven demand. Despite a recent huge storage build, traders largely ignored bearish undertones since much of the build was expected on account of soft spring temperatures. Regional storage shortages, particularly in the East and Midwest, continue to support market sentiment.

LNG feedgas volumes have risen, adding to export demand in the face of firm demand from European and Asian consumers. Furthermore, year-on-year electricity generation growth is supporting industrial demand. On the supply side, dry gas production has fallen slightly, and forecasted reductions in production imply tightening fundamentals. Only modestly increased rig activity signals ongoing capital restraint among producers.

Weather continues to be the biggest drag. Temperatures throughout the U.S. will continue to be moderate, restraining both cooling and heating demand outside the South. This weather softness is holding back short-term upside momentum, despite geopolitical uncertainties like threatened tariffs on Canadian gas bringing new supply-side risk, especially to the Northeast.

European natural gas futures continue to be under pressure at multi-month lows, as short-term demand is weak and regulatory developments are in flux. The EU is debating reducing mandatory Natural gas storage requirements before next winter, with some member states, such as Germany, already adjusting their national levels lower. This change occurs as inventories are currently at moderate levels and renewable production continues to balance fossil fuel dependence.

The overall energy plan for the continent is shifting. The EU is getting ready to publish a 2027 timetable to wean off Russian natural gas, although Russia still has a significant portion of imports in pipelines and LNG. Meanwhile, geopolitics—such as a U.S.-proposed peace offer in Ukraine—are on the cusp of cooling relations, even opening a potential for bringing some Russian supply back.

Near-term, colder-than-usual weather in northwest Europe should help raise Natural gas consumption for the short term, bringing mild relief to otherwise weak demand. But tight storage levels and high levels of renewables generation remain to constrain Natural gas price upside, leaving sentiment nervous.

The natural gas market continues to be underpinned by export flows and regional storage tightness in the U.S., with Europe balancing weather-driven gains against wider structural and policy changes. In both regions, short-term upside is held back by benign temperatures, with geopolitical and regulatory developments set to guide Natural gas sentiment over the next few weeks.