Operation Epic Fury — and the subsequent closure of the Strait of Hormuz — has upended the global energy supply chain, leading to much higher global energy prices. European liquefied natural gas (LNG) prices have increased roughly 75%, while Asian LNG prices have almost doubled.  In sympathy, near-term U.S. natural gas prices initially spiked before retreating to pre-Epic Fury levels. With U.S. LNG export facilities operating near capacity, elevated global LNG prices are unlikely to drive near‑term increases in domestic natural gas prices. Higher global LNG prices have increased the winter risk premium for U.S. natural gas with the January 2027 contract trading up to 65 cents more than February 2027. Elevated global LNG prices increase the risk premium for U.S. natural gas when extreme cold requires high prices to curtail LNG exports.

Over the past 30 days, the April 2026 natural gas contract traded as low as $2.87 and as high as $3.49 before ultimately expiring at $3.095, a 12-cent increase over the March settlement.

U.S. natural gas storage inventories peaked at approximately 3.96 (trillion cubic feet Tcf) in early November before declining to 1.829 Tcf by the end of the withdrawal season. This balance is right in line with the 5-year average ending seasonal balance of 1.815 Tcf. Due to winter temperatures, which were well above average in the West and below average in the East, the regional storage differences are noticeable. The Eastern and Midwest regions are roughly 15% below the 5-year average, while the Mountain and Pacific regions are 67% and 54% above their respective 5-year averages. We should see this play out in the regional markets as the Eastern region’s prices will remain supported while the West tries to shed gas this summer.     

PJM continues discussions about unprecedented load growth — driven primarily by hyperscale data centers and AI infrastructure — which is colliding with constrained interconnection timelines and record high capacity prices. AI- and cloud-driven demand is outpacing new generation, creating near-term reliability concerns and cost pressure as supply tightens. Due to this imbalance, there have been three consecutive high-priced capacity auctions, including one auction clearing short of PJM’s reliability target. Consequently, there’s growing concern about reserve margins in the coming years. 

In response to growing concerns, major hyperscalers — massive cloud service providers — signed a White House-brokered Ratepayer Protection Pledge. In signing the pledge, hyperscalers are committing to:

• Build, bring, or buy new generation for their data centers within PJM
• Pay for all transmission and interconnection upgrades
• Pay for capacity and infrastructure even if not fully used

Currently, PJM is moving forward with a reliability backstop — a temporary capacity procurement intended to address near-term capacity shortages and allow time for data center demand to become more predictable. This plan also includes eventually charging data centers directly for the costs of new power generation.

This approach is not a PJM capacity market redesign; it’s more like temporary insurance. Although leaders have stated they intend to allocate costs to new large loads, this will not resolve near-term reliability issues or lower current high capacity prices.

The next PJM capacity auction will provide more insight into what can be expected for capacity prices in the coming years. The next auction, for the 2028-2029 delivery year, is scheduled for this summer, with results expected to post on July 14, 2026. There will be an additional auction later in the year to procure capacity for the 2029-2030 delivery year, with results anticipated on December 22.

The reliability backstop will also not materially lower hourly LMPs, as capacity payments cover availability rather than energy, and LMPs are set by the marginal generator in the day-ahead and real-time markets. More natural gas generators are likely to be built for the data center backstop — increasing demand for natural gas and possibly increasing fuel costs for all generation in the region. In short, the backstop stabilizes the system — it doesn’t make power cheaper, but will likely be bearish to capacity costs. The structure of the wholesale energy market impacts all customers and cannot be allocated to any specific customer class.

March 2026 kicked off the spring season with well above-normal temperatures across nearly the entire country. This year featured the second-warmest March since 1950 nationally based on gas-weighted heating degree days (HDDs), second only to the scorcher of 2012. Most areas finished at least 5 degrees above normal, with parts of the Western U.S. closer to 10 degrees above normal. March has trended above normal in the past 10 years across the East, and this year was no different.

Early summer forecasts are starting to be released. Most are expecting another summer that finishes warmer than the 30-year normal nationally, which has been a noticeable trend of the past 10 to 15 years. The strongest warm anomalies are forecast in the western half of the country. The eastern half of the country is forecast a bit closer to normal, seeing potential cooler risks with a developing El Niño late in the summer.

El Niño forecasts have become stronger in the last month as more models suggest a moderate to strong event could develop for the upcoming winter. Historically, these events have correlated well with above-normal temperatures in the U.S., though forecasts made this far in advance come with some reliability concerns. NOAA’s Climate Prediction Center currently has the probability for at least a weak El Niño around 80% as of March. Should an El Niño event actually take place, it might lead to a downward trend in both gas and power prices.