Posted: November 14, 2025, 2:15 pm

Welcome Aboard

In a previous life, our days were spent on a trading desk making markets in technology equities for institutional clients. We were blessed to be around some very smart minds. With a short walk, we could talk to some of the very first guys doing quantitative computer trading, or speak to option market makers, statistical arbitrage traders, and even folks speaking a foreign language like bond gibberish. Everyone had great insights, thoughts, or prognostications on the markets. Early in our career, we were very fortunate to meet a Frenchman named Antoine. Antoine was a tall slender man who walked in every day with a $5000 tailored Armani suit, a touch of gray hair in the right places, and a fantastic French accent that confirmed he had to be a market genius. In other words, Antoine looked like the guy central casting always pulls for every Wall St. movie made. One day Antoine walked up, nodded hello and decided to stop and chat. After some formalities, the question of Antoine’s “market thoughts” was asked to which he replied, ‘Ah oui, the market. Well if she is up, then she’s an up. If she is down, then she’s a down.’. Probably because of the French accent, this sounded very scholarly and wasn’t met with the usual jargon of thanks Capt. Obvious. Instead, this made such an impression on us, it’s how we’ve tended to look at the short term markets moves, aside from obvious market drivers. Oh sure, if your favorite company misses the quarterly earnings consensus by a wide margin, there’s a reason for the 10% drop, but trying to put meaning to the day to day, minute by minute market moves without obvious cause, just isn’t our A-game nor do we give it an A effort.

So why are we droning on about our either profound, or parochial, short term mentality of markets? Well, here at the WPO, we like to think we’ve got some well reasoned and thoughtful long term fundamental views, specifically on natural gas and electricity, but the answer of “if she is up, she is up” to short term market moves might not be as enlightening or precise as some might wish.

With that, we couldn’t be more thankful that our friends at Pinebrook Energy Advisors have graciously offered to lend their expertise. We’ve known the folks at Pinebrook for years and they are the experts’ expert. Going forward, their market commentary on the gas market will be part of the WPO making this publication a whole lot smarter. We aren’t planning on moving away from all of our gas commentary, in fact we might even find like minded thinking, or form time to time, even healthy disagreement with our buddies which is fine, because that’s what makes a good market. We are excited and grateful for their contribution and trust the WPO reader will appreciate the insight.

By the way, back to one of our most influential market mavens, Antoine. Funny thing, it turns out Antoine just liked hanging out on the trading desk when allowed. His real W-2 gig was importing all the furniture for the company offices around the country. Somewhere in the Bizarro World, probably France, there is a furniture guy that lives by a motto some Wall St trader told him years ago….’if a chair is comfy, then a chair is comfy’. Hard to argue the wisdom.

Coal Part II

Last week we did a little dive into the domestic coal market. One of the things we pointed out was coal stocks and how markets might be starting to take a look as we head into winter. We mentioned that we’d follow up when the next EIA data point came out which was yesterday as the November Short Term Energy Outlook was released. Giddy were we to dive right in!

Our first stop was electricity forecasts. The sales number to end use customers is expected to rise by 2.4% for 2025 from last year, and another 2.6% in 2026. If you’ve read the WPO, no need to even comment on why, but we will anyway…data centers and crypto mining. Most of these increases are forecasted to be in ERCOT where EIA expects the region to account for 66% of the rise next year. These increases on ERCOT are expected to drive the overall wholesale prices higher next year. EIA tracks 11 regional wholesale markets and expects the weighted average will end 2025 at $47/MWh which is up 23% from 2024. The 2026 forecast is expected to add another 8% and close at $51/MWh. Interestingly enough, a fair amount of the forecasted rise is coming from summer spikes being forecasted in ERCOT. The chart below lays out the forecast and leaves part of us wondering if EIA has some new yet to be release weather prediction tool? In fairness, this is a two year chart and the 2026 chart looks more like the norm while 2025 was an anomaly. Also, this is an average, and it’s not unheard of for a few days in ERCOT to drive the overall number much higher.

We’ve buried the lead long enough, it’s time to look at the coal stockpiles. EIA is forecasting the end of year inventories to be 107 million short tons (MMst) which would be down 17% from 2024. We touch on the reasoning last week which is mostly the increase in natural gas and load producing more coal fired electricity production this year. Looking at the chart below, and it’s kind of confusing given the current line versus year end, we see the lowest stockpiles in a few years. In a month over month turnaround, EIA is now forecasting coal-fired plants will build stocks next year raising their inventory number by 13% from last month, but still near the lows of recent years.

We don’t have a market price prediction segment in the WPO and it’s really never been our game. That said, if we look at pricing forecasts below for some key inputs, coal isn’t in position to replace natural gas in the stack. EIA has made the argument that utility scale solar might help, but their predictions don’t seem to support it with renewables generation up just 2%. That leaves us with natural gas still holding the trophy as the marginal fuel for electricity pricing. The STEO forecast is calling for higher export LNG and flat production in 2026. If that’s the case, it’s hard to see prices coming down.

As readers know, we like to add an interesting tidbit to for use at the weekend cocktail hour. The Brent Crude Index actually includes WTI Midland crude. Basically, there wasn’t enough North Sea crude that makes up the basket being pumped to cover the contracts. Enter WTI to fill out the volume needed for a contract. It’s a little more complicated than that, but WTI is in Brent Index Futures as of June 2023.

IEA World Energy Outlook

This week the International Energy Agency (IEA) released their World Energy Outlook 2025. Long time readers of the WPO know we have somewhat of a love/less than love relationship with the IEA which is a beer at the bar discussion and not for this blog. That said, the report is widely read and circulated for policy and economic forecasts and is at the very least, worthy of a glancing read.

The big takeaway being discussed from this year’s report is peak oil is no longer to occur this decade. In fact, oil demand and production is now forecasted to occur sometime around 2050.

Global electricity demand is expected to ramp this year 3.3% and an additional 3.7% in 2026. Looking out further, global demand is forecast to rise 40% by 2035 and 50% by 2050. As expected, data centers and AI is a driver, along with rising AC and appliance use from emerging economies.

Natural Gas Market Commentary

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As of Friday morning, natural gas futures were on track for the fourth straight weekly gain. I caveated that with a bit of a timestamp because also as of Friday morning, the market was down sharply on the day and looking poised for its first meaningful pullback since December rolled onto the front of the forward curve in late October. So, there is a chance that by the time you’re reading this, futures end up lower on the week, but as of now that doesn’t look to be the case. Sentiment has been stubbornly bullish of late, with market participants seemingly shrugging off strong storage inventories and an upcoming two-week stretch of unseasonable warmth. Instead, the focus coming into this week was on the first significant cold snap of the season.

Monday and Tuesday of this past week did indeed see an impressive spike in heating demand. Residential and commercial natural gas usage increased roughly 75% from previous levels, rising from the low 20-Bcf-per day range to nearly 39 Bcf for a short stretch. This is likely going to be enough to tip the scales toward a net withdrawal for the week ending today the 14th, which will be reflected in next Thursday’s government storage report. It was also a reminder of how volatile winter natural gas demand can be.

I referred to the recent bullish sentiment as “stubborn”, but it is not totally lacking merit. Those who make their living predicting weather are coming to a consensus that we are likely in store for a colder winter season than we have been subject to in recent years. The Weak La Nina setup along with some other key atmospheric indicators are pointing toward a very strong chance of a cooler-than-normal period from December through February, with the most significant risk focused on the populous Upper Midwest. A recent forecast showed Winter 2025-26 as the coldest since 2018, but some outlets have pointed toward the extremely frigid Winter 2013-14 as an appropriate analogue.

We all know that long-term weather forecasting is a tough gig, and what actually plays out over the coming months is far from certain. However, the futures market prices in risk, and risk looks to be elevated until proven otherwise. A cold season against the backdrop of record (and growing!) LNG export demand and sluggish production growth could evaporate the storage cushion quickly. So, for the time being, the path of least resistance for the market appears to be sideways to higher. That said, if the first half of December ends up looking like the forecasts for the last half of November, we could start seeing that risk premium evaporate quickly.

In any case, we are entering into the most exciting stretch for energy markets, and it looks like this time around is shaping up to be a wild ride.