Energy Market Update: Sept. 3, 2025
🔎 Market Spotlight: Contango Building Momentum
The front of the forward natural gas curve is showing a steep contango, with the December NYMEX contract trading 31% higher than October (184% annualized). This setup creates strong financial incentives for producers to shift production into early winter.
If near-term supply remains weak, this technical backdrop could spark another bullish run, with the front-month contract potentially breaking above $3.00/MMBtu later this month.
Did you know: “Steep contango” describes a situation in commodity markets where the price of a commodity for immediate delivery (spot price) is significantly lower than the price for future delivery, with future prices rising sharply for contracts further out. This “upward-sloping” curve indicates a perceived oversupply of the commodity in the present, making it expensive to store, and a belief that prices will be higher in the future
WINTER 2025/2026 NATURAL GAS PRICING
📈 Key Market Drivers
Pricing
- Despite moderating late-summer weather, natural gas ticked up slightly at month-end as investors bought into relatively low prices.
- Winter strips rose 10–15 cents across the upcoming months, signaling growing hedging interest.
- Natural gas for next winter (2025/26) remains cheaper than last winter, when normal seasonal temps kept pressure on prices.
Supply
- Last week’s injection was only +18 Bcf, marking the third out of four weeks below the 5-year average.
- U.S. production hit a record 108.5 Bcf/d, reinforcing a strong near-term supply base.
- Storage is on track for ~3,900 Bcf by early November, suggesting a well-supplied position heading into winter.
Demand
- The long-term LNG story is the big one: export capacity is set to nearly double from under 17.0 Bcf/d today to 33.5 Bcf/d by 2030.
- Newly expanded Plaquemines and Corpus Christi facilities are adding capacity now, and Golden Pass has begun test flows.
- This shift will materially tighten U.S. balances and support higher floor prices in the coming years.
EIA: STORAGE REPORT
Natural Gas Storage Outlook
The weekly EIA Natural Gas Storage Outlook report tracks the volume of natural gas in underground U.S. storage, revealing weekly fluctuations and comparison against 5-year averages.
NYMEX Forward Calendar Strips – contango widening at the front end
💡 Did You Know?
The NYMEX 12-Month Strip averages the next 12 months of Henry Hub futures into one price. It’s a powerful indicator of market sentiment — allowing traders (and end users) to lock in year-long coverage at a blended rate. Watching shifts in this strip helps gauge the broader direction of gas markets, beyond just the prompt month.
Natural Gas Settlement Price History
A chart highlighting the monthly and yearly settlement prices for NYMEX natural gas futures contracts, revealing how prices have responded to supply, demand, and weather over time.
⚖️ What You Should Do
- Lock in small winter positions now: Buying ~25% of 2025 winter and a light summer 2026 block provides insurance against upside risk.
- Watch 2026 power pricing: Electricity for 2026 has started to decline, aligning with softer gas outlooks. Prices for 2027–28 are already lower, but the recent shift makes 2026 more attractive.
- Managed Index Strategy: For large users (1M+ kWh/year), explore managed index products instead of locking into full fixed rates. This lets you capture dips — like today — while having protection if conditions suddenly swing higher.
- Eliminate hidden premiums: Focus on stripping out capacity charges and ancillary costs where possible.
🌡️ Weather & Outlook
- The October contract briefly topped $3.00/MMBtu Friday ($3.023) before sliding to close at $2.997. Technicals remain bullish, with another breakout attempt likely.
- Short-term fundamentals lean bearish:
- Upcoming EIA reports could show injections of 48 Bcf lower than usual.
- Cooling demand for early September is 27 CDDs below 30-year normals, putting pressure on gas burn.
- Despite weaker near-term weather demand, production softness in the shoulder season supports prices, while LNG variability remains a wild card.
- The 30–60 day window remains the time to watch for stronger upside catalysts.
Calendar Year AD Hub Pricing vs. Henry Hub – correlation watch
This analysis tracks historic and current prices for electricity at the PJM AD Hub, comparing day-ahead spot markets and forward contracts to illustrate short- and long-term market trends.
Electricity: Did You Know?
- PJM’s latest capacity auction results signal rising costs in the region, with AI data center demand a major driver of higher bills and increased volatility. Some forecasts suggest rates could jump up to 60% over the next five years in the PJM area.
Capacity Market Update
- The 2026/2027 PJM Capacity Auction results were released in late July, with prices rising to $329.17/MW-day, slightly above the expected collar max due to a last-minute adjustment.