$16 Gas Nobody Wants

Monday, June 01, 2026 · 04:23 AM

test JKM closed at $18.30/MMBtu on May 29, creating a $15.94 spread to Henry Hub. US natural gas futures climbed above $3.30 per MMBtu in late May, hitting their highest level since early February, as LNG feedgas flows to major export plants declined due to seasonal maintenance work. The arbitrage window looks spectacular on paper, but US exporters are running into a hard ceiling: terminal utilization is already near maximum, and something unexpected is eating incremental supply.

Mexico's pipeline imports of natural gas from the United States averaged 6.638 Bcf/d in 2025, a 3.4% increase over 2024 and a new peak since records began in 1973, with imported volumes now covering roughly 77% of the country's total demand. Mexico natural gas imports via pipeline from the United States were scheduled to hit 8.25 Bcf/d on Thursday, the highest level this year as cooling demand ramps up. That's 8.25 Bcf/d flowing south—more than the daily output of the entire Haynesville basin—and it's structural, not seasonal.

The market is missing the denominator. EIA raised its 2026 LNG export forecast to 17.0 Bcf/d, up from 16.4 Bcf/d in January and well above 2025's record of 15.1 Bcf/d. The largest recent gains have come from Venture Global Inc.'s Plaquemines LNG facility in Louisiana, which is already pulling about 4 Bcf/d of feed gas and received authorization to export 3.85 Bcf/d, up 450 MMcf/d. Golden Pass LNG, a joint venture between QatarEnergy and ExxonMobil, received approval to begin commercial exports from the first of three 850 MMcf/d trains this month, with Train 2 expected to start in late summer or early fall of this year.

But here's what consensus isn't pricing: natural gas plays a critical role in Mexico's energy matrix, with 60% of total demand coming from combined-cycle power plants. Every incremental Bcf headed to Monterrey or Guadalajara is a Bcf that can't load onto a vessel at Sabine Pass. Total LNG export demand clocked in at roughly 3.0 bcfd higher year-over-year over the past 30 days, with projections that total feedgas flows will climb steadily through the summer and potentially reach up to 22 bcfd by year-end. The algebra doesn't work unless Lower 48 production accelerates—and it's not.

This isn't 2021. US gas production in the Lower 48 states eased to 109.4 bcfd in May from 109.8 bcfd in April. The Permian is adding associated gas, but Haynesville rig counts are flat and Appalachia is constrained by takeaway capacity. Pundits often cite the surplus/deficit to the five-year average as the more important driver, but the structure of the US natural gas market has changed materially in recent years, with LNG Export Flow Tracker showing deliveries to Lower 48 liquefaction plants averaged 18.1 Bcf/d in April 2026, versus 11.1 Bcf/d in April 2021. That's 7 Bcf/d of structural demand shift in five years.

• Mexican power sector appetite: Combined-cycle plants pulling 60% of total Mexican gas demand, with no domestic production growth to offset it. This bid is price-inelastic below $5/MMBtu.
• Summer utilization drag: Gulf Coast LNG terminals typically see lower utilization during summer heat, creating a natural supply ceiling even as Asian prices scream for molecules.
• The real arb: Watch whether Cheniere delays planned maintenance at Corpus Christi and Sabine Pass to chase JKM premiums—CEO Jack Fusco hinted at flexibility during CERAWeek but made no commitments.