August brought a mixed bag of market drivers for energy prices. Natural gas production averaged ~107.4 Bcf/day, close to record levels, while total working gas in storage climbed to 3,065 Bcf, about 6.5% above the five-year average. LNG exports held steady at ~15.8 Bcf/day, signaling strong global demand for U.S. gas. Meanwhile, cooler-than-normal weather across the Midwest and East helped reduce natural gas used for electricity generation. Crude oil prices remained range-bound around $80–85 per barrel, though tight distillate inventories and strengthening global demand could influence prices in the coming quarter.
Bull Factors:
-LNG exports averaged 15.8 Bcf/day (up from 12.9 Bcf/day YoY), pulling more U.S. supply into global markets and tightening domestic availability, which supports higher natural gas prices.
-Weekly storage builds slowed to +18 Bcf vs. +38 Bcf 5-year avg, pointing to tightening supply-demand conditions that could lead to lower end-of-season inventories and increased winter risk premiums.
-Futures prices signal rising expectations, with Q4 projected at $3.90/MMBtu and $4.30 into 2026, reflecting market sentiment that winter demand and export activity will strain supply and push prices higher.
-Data centers now consume ~4.4% of U.S. electricity and are expected to reach 6.7%–12% by 2028. This accelerating growth, along with an industrial rebound, is expected to lift long-term natural gas demand in power-heavy regions, supporting structural price strength.
-Distillate fuel inventories are nearly 7% lower than last year, with levels at 114.2 million barrels. As heating season approaches, some demand may shift to natural gas as a backup fuel source—tightening the energy supply mix and creating additional price support.
-PJM capacity reserve margin fell to just 3.3% for 2026/2027, raising concerns over grid reliability and prompting upward pressure on forward capacity and energy prices in the Mid-Atlantic market.
Bear Factors:
-Cooler-than-normal August temperatures in the Midwest and East significantly reduced cooling needs, cutting gas-fired power generation and lowering near-term demand.
-Natural gas production remained elevated at 107.4 Bcf/day (vs. 101.9 Bcf/day YoY), contributing to a strong supply environment that offsets bullish factors and caps immediate price growth.
-Power burn fell from 48 to 41 Bcf between Aug 20–26, underscoring decreased electricity demand and less gas use for generation, which weakens spot market pressure.
-Storage is projected to reach ~4 Tcf by the end of injection season, signaling a well-stocked market heading into fall and reducing urgency for aggressive winter pricing.
-September weather forecasts remain mild, limiting the likelihood of late-season heat-driven demand spikes and further suppressing natural gas consumption for cooling.
Final Takeaways:
Energy markets ended August with a steady outlook, supported by strong production and healthy storage levels heading into fall. However, international demand for U.S. natural gas and slower-than-normal storage growth suggest the supply cushion may not be as deep as it appears. Looking ahead, structural factors, like future grid capacity concerns in key power markets, are gaining attention. Together, these dynamics underscore the importance of staying proactive with energy planning, even when prices appear calm in the short term.
Charts and graphs sourced from Constellation
