SUPPLY & DEMAND FUNDAMENTALSMONTHLY ENERGY OUTLOOKMay 2026

NATURAL GAS FUNDAMENTALS

1. US Storage

Working gas in storage reached 2,142 Bcf as of the week ending April 24, 2026 (EIA release April 30), marking a net injection of 79 Bcf. Levels stood 116 Bcf (6%) above the year-ago period and 153 Bcf (7.7%) above the five-year average of 1,989 Bcf. The early injection season is off to a strong start following a milder late-winter drawdown, with inventories already comfortably above seasonal norms ahead of the summer build.

Risks center on accelerated builds if shoulder-season demand stays soft amid above-normal temperature outlooks and continued robust supply growth. Forward outlook (per April STEO) points to inventories ending October 2026 at 4,015 Bcf—6% above the five-year average—setting up a balanced but potentially loose summer/fall position unless LNG feedgas or power demand surprises to the upside.

2. US Production

Preliminary dry natural gas production averaged 110.0 Bcf/d in February 2026 (EIA Natural Gas Monthly, released April 30), up 4.9% (5.1 Bcf/d) year-over-year and the highest February output on record since 1973. Marketed production is forecast to rise 2% in 2026 and 3% in 2027 (April STEO), supported by steady associated gas growth in the Permian alongside incremental contributions from Haynesville and Appalachia.

Basin sensitivities remain tied to oil-directed activity in the Permian and pipeline expansions supporting Appalachia/Haynesville. Risks include potential weather-driven curtailments or moderated upstream capital discipline amid price volatility. Overall supply trajectory remains robust, with production holding near recent highs.

3. US LNG

U.S. LNG exports averaged a record 15.1 Bcf/d in 2025 and are forecast to climb to 17.0 Bcf/d in 2026 and 18.6 Bcf/d in 2027 (April STEO). March 2026 exports hit ~17.9 Bcf/d (second-highest monthly on record), with year-to-date feedgas averaging ~18.9 Bcf/d and briefly touching 20.1 Bcf/d in early April. Golden Pass LNG shipped its first cargo in April 2026 following first LNG production in March; Corpus Christi Stage 3 continues ramping (FERC request filed for Train 6 feedgas). DOE approvals granted incremental export capacity at Plaquemines (+0.5 Bcf/d) and Elba Island (+0.1 Bcf/d) in March/April 2026. CP2 Phase 2 reached FID in March 2026.

Implications: Near-peak utilization of existing terminals combined with new-train startups will provide a structural demand floor, tightening balances and supporting Gulf Coast pricing even as domestic supply grows.

4. Other Demand Drivers

U.S. electricity load growth continues to support natural gas as the marginal fuel, with natural gas projected to account for 39% of power generation in 2026 and 40% in 2027 (April STEO). Power-sector consumption remains the largest driver, augmented by commercial-sector growth of ~3% this summer (residential/commercial combined). Industrial demand stays relatively stable.

Key structural changes revolve around data-center expansion, which dominates incremental load additions across PJM and ERCOT and underpins sustained natural gas-fired generation needs during peak periods despite renewable and battery growth.

5. Natural Gas Forward Strip(s)

NYMEX Henry Hub futures (as of late April 2026) show the May 2026 contract near $2.52/MMBtu, with June–September contracts in the $2.72–$3.09 range and mild contango building into winter. The strip reflects ample storage, strong production, and shoulder-season softness, with spot prices recently trading $2.5–$2.8/MMBtu. Bearish factors include record-high inventories, continued supply growth, and warmer weather outlooks. Bullish catalysts include accelerating LNG feedgas (nearing 19–20 Bcf/d) and any hotter summer power demand or geopolitical supply disruptions.

Takeaway: Fundamentals favor range-bound trading with limited near-term upside; monitor LNG ramps and summer weather for potential volatility, but the strip suggests patience on the long side until injection season dynamics clarify.

POWER FUNDAMENTALS

1. Load | Demand Growth

PJM’s 2026 Long-Term Load Forecast (January release) projects summer peak load growth of 3.6% per year over the next 10 years (reaching ~222 GW by 2036), with net energy load also elevated; near-term forecasts through 2032 were modestly trimmed versus 2025 due to refined data-center vetting, EV adjustments, and economics, though data centers remain the overwhelming driver (accounting for >100% of near-term growth in many zones).

ERCOT’s preliminary Long-Term Load Forecast (April 2026 filing) signals aggressive growth, with summer 2026 peak load projected in the 90,500–98,000 MW range (potentially breaking records) and total demand reaching ~278 GW by 2029—more than triple the 2023 all-time peak—driven primarily by data centers, crypto, and industrial additions. High-load scenarios could elevate 2025–2027 annual growth by ~15% in ERCOT.

Drivers: Data-center development continues as the dominant structural force across both ISOs, with transmission and distribution companies reporting robust large-load interconnection requests.

2. Forward Power Strip(s)

Forward power prices reflect soft underlying natural gas fundamentals, robust renewable additions, and data-center-driven load growth. PJM and ERCOT calendar strips for 2026–2027 show limited recent movement, with high-load scenarios (data-center upside) adding meaningful premium—particularly in ERCOT—while baseline pricing incorporates ample supply and milder spring conditions. Spot averages remain tempered by ample generation and shoulder-season demand. Weather outlooks for May–July lean neutral-to-warmer in key regions, limiting near-term upside.

DISCLAIMERS

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This report contains forward-looking statements, including forecasts, projections, and opinions based on current market conditions, which are inherently uncertain and subject to risks and uncertainties. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Recipients should consult their own independent advisors and make their own investment, legal, tax, accounting, and other evaluations before making any decisions based on the information in this report.