Taking a Step Back So That We Can See Forward

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By Brendan Boyle, Director, Market Intelligence, Transparent Energy, August 2025

For loyal followers of Transparent Energy’s market reports, webinars, fireside chats, and related presentations, we have been strongly encouraging customers to secure medium-to-long term energy hedges while prices remain favorable, and we have the receipts to prove it!  

This is not to say that we are soothsayers, or that we can tell you how to perfectly time the market – no one can. Where we do succeed is by helping customers understand their options, evaluate prevailing market conditions, and then seamlessly execute a strategy with the help of our industry-leading reverse auction platform.

Back to Basics – What is Driving Energy Prices Today

Let’s focus on market fundamentals before delving deeper into the unique situation in which we find ourselves in August 2025.

1) Natural Gas Storage – Bearish

As of July 25, the U.S. has an estimated 3,123 billion cubic feet in underground storage. While slightly behind last year’s pace, this represents a 6.7% surplus vs. the 5-year average. We anticipate end-of-season (~late October) storage to settle around 3,900 Bcf, putting inventories in an extremely healthy position.

2) Supply – Neutral

Natural gas prices settled below $2 per MMBtu in five of the 12 months of 2024 and averaged $2.269 for the year. As a result, we began to see output dip as producers failed to see the value of continuing to pull gas out of the ground for such little return. Prices have recovered to some degree, averaging $3.453 so far in 2025, and as global demand for U.S. natural gas increases (more on that later), we’ve seen an uptick in production, with output estimates establishing all-time records at the end of July.

Natural gas-directed drilling rigs are finally on the uptick after a long period of sluggishness, and there have been massive improvements in drilling efficiency, as highlighted by some of the country’s largest producers.

As for electricity, several large baseline coal-fired power plants have been retired as states across the country strive to meet emissions reduction targets. This coal generation has been replaced primarily with renewables. In 2024, solar accounted for 66% of all new electric-generating capacity.

Under the Trump administration, credits for renewable electric projects are being phased out, certain coal plants have been extended, and a nuclear revival is afoot.

Last week, we provided an update on how PJM capacity prices are now locked in at record-setting levels through mid-2027. It should be noted that the Mid-Continent Independent System Operator (MISO) auction for 2025/2026 saw a tenfold jump in capacity costs year-over-year. Higher capacity prices are sure to incentivize new generation as is the intent of the mechanism, but they are also hitting enterprise energy budgets hard.

3) Demand – Extremely Bullish

This outlook is based on two rapidly growing industries: LNG exportation (for natural gas) and data center development (for electricity). Here is a quick look at each:

• LNG: In 2024 U.S. dry natural gas production averaged around 104 Bcf per day, with daily demand ~ 90 Bcf per day, leaving roughly 14 Bcf per day as a surplus. Year to date, U.S. LNG exports average 14 Bcf per day, which balances the supply/demand equation leaving little room to increase inventories year-over-year.

We anticipate by year’s end another 4 Bcf per day of LNG export capacity coming online, with expectations of at least an added 10 Bcf per day by 2029. It is realistic to believe that U.S. LNG export capacity could exceed 32 Bcf/d by the end of the decade.

If gas production does not increase at the same rate, then price will be the only mechanism to maintain equilibrium in the natural gas markets. Prices for natural gas in Europe and Asia are currently trading in the $12 per MMBtu range, around 4x(!) the cost of gas in the U.S. It is not unreasonable to prepare for a convergence between domestic and global prices.

• Data Centers: We’ve covered this recently in greater depth, but the point cannot be emphasized enough: the increase in electric demand due to the buildout of data centers focused on developing AI and related technologies is nearly unprecedented. The widescale adoption of in-home refrigerators and air conditioning took place over decades. The U.S. electric grid is facing a monumental challenge in the years ahead, and it is extremely likely that the cost of this growth will be spread among its rate payers.

• Weather – Uncertain

According to data from the National Weather Service, 2024 was the world’s warmest year on record and all 10 of the warmest years on record have all occurred during the past decade. It has been 48 years since the planet experienced a cooler-than-average year compared to data going back to 1850.

Whether due to human-created pollution, or a cyclical global occurrence, the global temperature is rising at a rate none of us have ever experienced. Could this mean we can expect hotter summers and milder winters going forward? Perhaps. However, global climate is notoriously difficult to predict. NOAA highlights significant climate anomalies and events, and hints at an increasing rate at which these occurrences have been taking place. It is impossible to forecast with any degree of certainty where these weather phenomena will lead us in the future, but we know for sure that there is a direct correlation between extreme temperatures and higher energy prices.

• Geopolitics – Uncertain

In 2022 when Russia invaded Ukraine, the rest of the continent mostly stopped importing Russian pipeline gas. This led to an astronomical run in European natural gas futures as indicated below:

Benchmark Dutch TTF gas futures briefly rose above $100 per MMBtu!

The Middle East remains a tinderbox of political activity in a region that is crucial to global energy supplies, both oil and LNG. Should conditions deteriorate to where shipping through the Strait of Hormuz becomes untenable, energy markets everywhere will experience tremendous upheaval.

These are extreme examples of how geopolitics play into energy markets, but an eye-opening reminder of how global events can impact the bottom line for natural gas and electric consumers everywhere.

What Does This Mean for My Business Today? And in Five Years?

Putting aside the major unknowns, U.S. energy markets today stand in a secure and advantageous position. Fundamentals are strong, and prices (the cost of the commodities, not the ancillaries) remain near the low end of historical norms when accounting for inflation. Since taking over for a second term, President Trump has prioritized American energy independence and has been actively working to establish trade deals to leverage our position as a global leader.

Just last week, the U.S. struck a deal with European Union leaders to provide American oil, natural gas, and nuclear fuels to the continent at a cost of $750 billion over the next three years. Similar negotiations are underway with other energy-importing nations such as Japan and South Korea. The longer-term implications of these global trade arrangements remain unknowable. Towards the end of his term in office, President Biden signed an executive order placing a pause on new U.S. LNG exportation facilities until a more comprehensive environmental review could be conducted (this was quickly reversed).

Several states continue to move forward with ambitious clean energy targets, with the goal of eventually establishing net zero greenhouse gas emissions. It’s uncertain whether these aims can be achieved without the federal incentives put forth by the previous administration.

All these factors combined explain that nothing occurs in a vacuum, and that natural gas and electricity, perhaps as much as any other commodity, have proven to be extremely volatile. Technology is moving at an unparalleled rate, and any unforeseen breakthroughs could send prices crashing, the way markets reacted to the implementation of fracking in the oil and gas fields. Despite extreme heat across the eastern half of the country, near-term energy prices haven’t shot higher as many expected. Energy markets are difficult to understand, let alone predict.

So, What Should I Do?

Unfortunately, we still do not know where prices are headed in the future. Anyone who claims they can is likely mistaken. All we can do is evaluate the numbers and the circumstances, and work with you to make the most informed decisions.

The numbers tell us that current market conditions remain favorable to move forward with a full or partial energy hedge as far out as 2030. In the graph below, the blue bars represent the 2-year trading range for forward NYMEX natural gas prices. The black line shows where those prices settled on 7/30/2025:

While prices aren’t currently at the absolute bottom, they are low enough for us to encourage action, rather than waiting to see which domino falls next. The U.S. Energy Information Administration agrees. In its latest Short-Term Energy Outlook, the EIA predicts with 95% confidence that natural gas prices will not fall below $1.82 per MMBtu or rise above $11.20 per MMBtu. With forward calendar strips out to 2037 all trading below $4.00, it is clear the upside risk far outweighs downside opportunity.

Armed with this information, the Transparent Energy team is prepared to collaborate with you to develop and execute an action plan to secure low-cost energy in the near, medium, and long term. Hedge with confidence!

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To learn more about your opportunities in today’s increasingly complex and volatile energy markets and how online auctions can minimize your energy spend, contact us today at letstalk@TransparentEdge.com. For additional background, see our News & Views section on www.transparentedge.com.

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