After reaching a high point of $4.901 in early March, the April 2025 NYMEX natural gas contract ultimately settled almost a dollar lower at $3.95. Price volatility remains a key theme for the natural gas market as financial investment firms continue to hold near-record length on natural gas contracts. This can cause prices to react significantly to any news that impacts the natural gas market.

Unseasonably warm March temperatures eased the pressure on near-term prices and helped bolster storage balances, which were toward the low end of normal at the end of February. As of March 28, U.S. storage balances sit at 1,773 billion cubic feet (Bcf), which is 22% (491 Bcf) behind last year’s balance, and 4% (80 Bcf) behind the 5-year average.

The natural gas market is grappling with several uncertainties, including the status of production increases, the progress of new liquefied natural gas (LNG) construction facilities, the pace of renewable generation buildouts, power demand for datacenters and AI, and the impact of upcoming summer weather on natural gas-fired power generation. Combined, these uncertainties are adding fuel to a bullish market outlook and increasing the risk of volatility throughout the next 24 to 36 months.

If you’re a consumer searching for value, looking further out the curve can provide some opportunity. Fig. 1.4, which includes data from 2022 to present day, plots a 1-year winter weighted NYMEX gas price for the term of April 2028 to March 2029. During the COVID-19 pandemic, pricing for this term reached a low point of $3.25, with prices rebounding to a highpoint of $5.36 by autumn 2022. Current prices for this winter-weighted term are around $3.75, which falls near the 10th percentile. This means that, 90% of the time, prices were higher for this term over this period.

As this year progresses, the interplay between rising LNG export demand, ongoing production growth, and global geopolitical developments will be pivotal. Market participants are closely monitoring these dynamics, which will influence price stability and long-term supply strategies.

Power markets are gearing up for potentially high prices this summer compared to last summer. 

For example, July ’25 pricing in the Western Hub of PJM (the regional transmission organization and independent system operator that operates the power grid for parts of 13 states and Washington, D.C.) is currently trading over $20/MWh higher than July ’24 was trading at this time last year. This bullish sentiment has the potential to be compounded by demand for natural gas in the generation stack this summer.

Throughout 2024, natural gas set the real-time price for power in PJM 73.7% of the time — meaning that natural gas was the most expensive fuel source in the generation stack during these time periods. While it’s expected the commodity will continue to have a heavy influence on costs going forward, there’s also concern reliable capacity may be tight during times of increased heat this summer, as evidenced in the results of the final incremental capacity auction for the 2025/2026 planning year.

The incremental auction gives generators the opportunity to take on more commitments, or exit commitments, due to changes in their expected availability — generation resources typically try to exit a position if they don’t think they’ll be able to successfully supply the reliability need. During this recent auction, generators attempted to exit 7,754 MW of committed generation capacity, though only 1,829 MW of capacity was successfully removed. The grid will rely on 5,925 MW of capacity for reliability that generation resources were unsuccessful finding a replacement in the auction. For context, 5,925 MW of generation capacity would potentially serve 2.5 million homes annually.

The net result of this scenario is that gas-fired generators may be called upon more frequently during times of supply shortage this summer, which could push prices even higher during times of peak demand.