Energy Prospectus

EBW Analytics Group

Building Summer Heat Guides Natural Gas Rebound

The July natural gas contract rose to $3.760 last night as traders reacted to a sustained
push higher in early-summer cooling demand. Week 2 jumped 8 CDDs to 85 CDDs, with
power burns to rise 4 Bcf/d from last week into the first official week of summer.

Still, LNG feedgas demand remains subdued near 14 Bcf/d with a two-train outage at
Sabine Pass and Corpus Christi yet to rise. Gas production rose over the weekend with
ongoing strength in Appalachia, offsetting upside price momentum.

Evolving weather forecasts likely remain the critical short-term market driver, with key
technical resistance at $3.78. Should Sabine Pass return over the next ten days into a hot
stretch of Week 2 or Week 3, the reaction of Henry Hub spot gas prices could be an early
indicator for July. Notwithstanding generally range-bound trading in recent weeks,
however, price volatility will be elevated in the back half of June.
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Bottomline: MY TAKE
Three things will drive the HH Aug25 contract over $4.00 during July:
> Weather: If July is hot in the eastern U.S. electricity and natural gas demand will spike up.
> LNG exports will ramp up toward capacity
> We may see one more triple digit storage build for the week ending June 13, then weekly builds will be much lower through August.
My forecasts are based on U.S. natural gas prices averaging $4.00 in Q3 and $4.50 in Q4. So far in Q2, the average price is over $3.40, which compares to $3.25 used in my forecasts.
EIA's forecast is that U.S. natural prices will average $4.90 in 2026.

From June 10 EIA Short Term Energy Outlook

Electricity demand. We have increased our forecast for retail electricity sales to better reflect projected demand growth, especially in the Electricity Reliability Council of Texas (ERCOT) and PJM independent system operators. The revisions are most notable in the commercial sector, where data centers are an expanding source of demand. We forecast that U.S. commercial electricity sector consumption will grow by 3% in 2025 and by 5% in 2026. In the previous STEO, we expected commercial electricity demand would grow by an annual average of 2% through 2026.

Electricity generation. We forecast that total U.S. electricity generation this summer will increase by 1%, compared with the summer of 2024, as a result of growing power demand from the commercial and industrial sectors. We expect higher natural gas prices this summer will result in less generation from natural gas-fired power plants compared with last summer, which is expected to be offset by more generation from coal, solar, and hydro. < Yes, it is true that the U.S. will need to keep their coal fired power plants on line to meet electricity demand growth.

Natural gas prices. The Henry Hub spot price in our forecast averages about $4.00 per million British thermal units (MMBtu) in 2025 and $4.90/MMBtu in 2026, compared with $2.20/MMBtu in 2024. Higher natural gas prices in 2025 and 2026 are the result of strong export growth that persistently outpaces U.S. natural gas production. > Looking beyond 2026, if U.S. demand for natural gas continues to increase by 5 to 6 Bcfpd per year through at least 2030, I believe that the "Right Price" for HH Ngas will become 1/10th the price of crude oil. In Asia and Europe the price of natural gas is ~1/6th the price of oil.

Friday's CFTC Commitments of Traders report indicated
speculators continue to build up natural gas positions en masse,
although a 30,000-contract increase in longs was more than fully
offset by 38,000-contract increase in shorts.

Total speculator positioning rose by 90,000 contracts in the two
weeks ending June 10th—the largest two-week increase since
February. Total speculator positioning is at a 16-month high.

While soaring speculator positioning has been largely balanced
between growing longs and growing shorts, it represents bigger
bets by traders with natural gas at a transition point from spring
into summer. Although recent trading has been largely range
bound (Friday's $3.581 July contract close was only 11.1¢ off from
four weeks ago), a larger price move may lie ahead.
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HOT weather in July/August is the key to where natural gas price go in Q3 and Q4 2025.
In order of importance, it is weather, LNG exports and AI power demand that will determine U.S. natural gas prices this decade.