Energy News Update: Apr 28th, 2025 Mild Spring Weather Leads to Deeper Than Expected Short-Term Decline, But the Long-Term Outlook
Energy News Update: Apr 28th, 2025
In our Apr 14th Energy Update, we explained that Spring Shoulder Periods occur between the winter heating and summer cooling periods, and the Fall Shoulder Period occurs between the summer cooling and winter heating periods when demand for Natural Gas and Electricity is very low.
In our last report, we said that although Natural Gas may decline further during this year’s Spring Shoulder Period, with supplies ending the Winter heating season 10% below the 5-year average, this year’s decline would likely be shallow, and the risk of higher prices remains very high.
But relatively warm weather across much of the United States in March continued in April, leading to less Natural Gas being withdrawn from storage than forecasted, and the 10% deficit at the end of March has virtually disappeared, leading to a deeper short-term decline than we anticipated.
The recent short-term decline is similar to the last Cyclical Bull Market in 2020. After its initial rally off its 2020 low, Natural Gas declined sharply before rallying to much higher prices due to a hot summer
It is not unusual to experience sharp pullbacks during Cyclical Bull markets, but as we explained in our previous report the Trump administration’s policies promoting increased production will mitigate the impact of surging electricity demand domestically and exports internationally, but demand is expected to outpace supplies, which supports the observation when prices were as low as they were in 2024, it always preceded Cyclical Bull markets that trended higher 2 to 4 years, and it didn’t matter who was president.
Our view was supported by the EIA’s latest Short Term Energy Outlook (STEO), in which they said U.S. Natural Gas demand, which they calculate as domestic consumption plus exports, will grow by 4% to 116 billion cubic feet per day (Bcf/d) in 2025 in their forecast. The growth is led by an 18% increase in exports and a 9% increase in residential and commercial consumption.
Based on their estimates of increased demand, the EIA expects Natural Gas to have an average price of $4.30 per MMBtu in 2025, up about $2.10 from 2024. And they expect the average will increase another 30 cents per MMBtu in 2026 to approximately $4.60.
And given the EIA’s forecast of where prices will likely average in 2025 and 2026, Natural Gas’s decline below $3.00 per MMBtu last week is an excellent long-term buying opportunity. The upside risk is far greater than the downside reward potential; therefore, we recommend that anyone with agreements expiring within the next 18 months take advantage of the recent short-term decline to reserve Natural Gas and Electricity to be available when their present contracts expire.
Not every client’s risk tolerance and hedging strategy is the same, but hopefully, today’s report helps you understand your risk/reward opportunities. We invite you to contact one of our energy analysts to help develop a hedging strategy tailored to your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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