Natural gas production hit record highs in July, while cooler weather across much of the country reduced electricity demand. With less air conditioning use and steady storage builds, short-term energy prices eased slightly as supply outpaced demand.

However, U.S. gas exports to Europe, Asia, and Mexico remained strong, limiting domestic supply and helping to keep prices from falling further. Meanwhile, the power grid serving the Mid-Atlantic and Midwest (PJM) showed signs of tight conditions. Its recent capacity auction—where power providers are paid to guarantee future electricity availability—cleared at the maximum price of $329.17 per MW-day. This means utilities had to pay top dollar to secure enough power for future needs, signaling limited excess capacity and the potential for higher long-term electricity costs.

Crude oil prices also edged higher in response to global trade developments and political uncertainty, adding further support to energy markets.

Bull Factors: 

– NG exports averaged 15.6 Bcf/d in July (+3.8 Bcf/d vs. last year) – Shipping more gas overseas reduces the amount available domestically, which can lift prices at home.

– New U.S.–EU trade deal pledging $750 billion in LNG purchases – Sustained European demand will likely tighten U.S. supply in the long term, potentially raising energy costs.

– Crude oil prices rose to $66.71/bbl on July 28, up $1.55 – Higher oil prices can increase production and transportation costs that feed into electricity and gas prices.

– Gas exports to Mexico remained steady at 6.3 Bcf/d – Consistent pipeline exports reduce U.S. supply, providing underlying support for prices.

– PJM’s capacity auction cleared at the price cap of $329.17/MW-day – Tight reserve margins in the PJM grid can raise electricity prices in the Mid-Atlantic and Midwest.

– Western U.S. pipeline constraints and scheduled maintenance could limit gas flows – If demand increases during these constraints, regional prices may spike and impact broader wholesale energy markets.

-Global LNG demand is set to grow 60% by 2040, led by China and India—China alone has over 26 million tonnes of U.S. LNG under contract. Rising exports reduce domestic supply, putting upward pressure on U.S. energy prices even in times of high production.

–Investment in LNG and energy infrastructure (e.g., Baker Hughes’ $13.6 B deal) -increased infrastructure investment locks in strong export demand, which could keep domestic supplies tighter over time.

Bear Factors:

-Record natural gas production at 107.9 Bcf/d in July (+3.9 Bcf/d vs. last year) – more gas in the system means abundant supply, which keeps energy prices from rising.

-Prompt-month natural gas prices fell to $2.99/MMBtu (7/28), down $0.34 in two weeks – lower short-term prices signal confidence in supply and help keep customer energy costs steady.

-Power plant gas demand dipped to 48 Bcf/d in July (vs. 49.2 Bcf/d last year) – Less demand from power generators eases upward pressure on wholesale power and gas rates.

-Strong storage injection — The week ending July 25 saw a 48 Bcf build into inventories, exceeding the 37 Bcf forecast, underpinning record storage levels and lowering winter price risk

 – Cooling demand easing — National forecasts and weekly consumption data show lower-than-expected A/C-related demand in late July, signaling lingering moderation in power sector gas use.

-Price volatility is down — Henry Hub front-month volatility dropped from 81% in Q4 2024 to 69% by mid‑2025, reflecting steadier markets and reducing the potential for sudden rate spikes.  

 Final Takeaways:

The market remains oversupplied in the short term, creating stability and preventing sharp price spikes. However, robust export demand, tighter power grid margins, and global energy market dynamics continue to support a floor under prices. While rates may remain steady or slightly lower for now, market conditions in late summer and early winter could push energy costs higher if demand increases or extreme weather emerges.