Posted: January 9, 2026, 1:28 pm

Welcome Back- Happy 2026!

Given the nice holiday respite, it’s been a couple weeks since a WPO update. The last time we spoke, or wrote/read, 2025 was coming to a close and we were all freezing. It’s amazing what a difference a couple weeks makes as we head into mid-January with weather resembling the end of March. Looking at the prices below, Day-Ahead LMP pricing across the ISO zones we follow looks like spring and not winter. Half way through December we were regularly seeing daily averages in the triple digits as winter arrived with force. Natural gas (more below) has continued the selloff started in December as the front month has moved from the mid $5 level to below $3.50/MMBtu. As shown below, the electricity markets have followed natural gas lower, and probably getting close to striking price for those with budgeted targets.

Venezuela – No Idea

We’ve often mentioned that we follow the oil market given it’s relationship to natural gas. This week a few folks have asked for our thoughts on the oil market given the US actions in Venezuela with our response being just short of “no idea”. The one thing we would point out is any short term move in the market based on production numbers ramping quickly from US involvement should be taken with a grain of salt. Any production increase will take investment which means rewriting capital plans of producers…..neither easy nor quick.

Natural Gas Market Commentary

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Natural gas futures have kicked off 2026 by plunging to new lows across the front of the forward curve. The now-prompt February 2026 contract is trading on Friday morning below $3.35 per MMBtu, which is the lowest price for that contract in more than four years. Following suit, the upcoming Summer 2026 NYMEX strip is south of $3.20 per MMBtu for the first time since early 2022. The market appears to be giving up on winter before the season even reaches its peak.

This idea is looking more and more logical by the day. Amid the second major warm pattern in the past three weeks, demand has suffered, with residential and commercial consumption looking more like mid-November than early January. Even though the weather is expected to cool down beyond the next 6-10 days, nothing in the forecast is indicating any extended periods of major cold across key population centers. As a result, projections for end-of-season inventories continue to creep higher, with the smart money now pointing toward a 2.0-Tcf-plus bottom heading into the spring and summer. For perspective, inventories ended last winter closer to 1.8 Tcf and the previous season above 2.3 Tcf. With the possibility that storage will look more like 2024 – which featured historically low summer natural gas prices – than 2025, the market is adjusting accordingly.

However, even as the futures market continues to discount risk, spot markets are still very much subject to upside volatility. The peak of the winter season is still ahead, and there remains plenty of opportunity for major cold. While the futures market is focused on the storage situation, which shows a strong enough cushion to withstand a cold snap or two, spot markets remain subject to pipeline constraints and the temporary production disruptions that can occur during major periods of winter weather. Rather than get complacent just because the forward market is already looking beyond winter, we recommend remaining vigilant about monitoring near-term conditions to be prepared for the next big round of cold.

Cocktail Corner

Over the holiday break, we had a few cocktail corners of our own. One conversation harkened back to April 2020 when oil futures settled at -$37.00. Someone posed the question on how that can ‘even be a thing, oil closing negative’. Without pulling out the Intercontinental Exchange Delivery Procedures manual, we simply explained that if you owned oil contracts for delivery and had no where to take delivery, you needed to liquidate your position. With oil contracts closing negative, you literally had to pay someone to take you out of your contract if you couldn’t accept delivery, and with the world shutting down in the spring of 2020, there was no storage left. After explaining this over a cocktail or two, and with a little more detail, someone in the group shook their head and commented on how wild that whole situation was and then pontificated that had to be a once in a lifetime in the world of commodities. With a smirk, it was suggested perhaps another round and an introduction to the world of electricity. By the way, this happens in the Permian Basin a lot with natural gas.

Arguing that electricity was a commodity, although admittedly not knowing if we’d put it in the hard or soft category, the group finally agreed that it was indeed a commodity. We did explain a unique quality of electricity is that it isn’t storable (this is where we insert an invite for Elon Musk to reply)….ok, not storable in size. Simply put, electricity is a commodity that needs to be created and consumed at the same time. With that, and we asked for a little latitude making the correlation, electricity has the same issue that oil had in 2020, sometimes too much gets made and there is no path to get it to the market. When that happens the mechanism is a negative market designed to disincentivize generation production when not needed. If you do make a MW and there is no demand to consume it or path to get it to market, you pay someone to take it off your hands, analogous to 2020 oil. In these two examples, oil was a storage issue, while electricity is a delivery issue which in simple terms, means not enough transmission or local demand. As the conversation needed to wrap up with football about to start, the question was asked how often that happens? The reply, shoulder shrugged, “more than you would think.”.

Interestingly enough, a few days later on a quick weekend sightseeing trip to South Dakota (insert joke here if you will, but the state capitol Christmas tree exhibit is very festive), this very situation was playing out as we drove through it. On a seasonally warm bright windy day in eastern South Dakota, the windmills were spinning at the max. Through handheld technology, one only needed to pull up the MISO app to see in real time the market trying to “disincentivize” the very wind farm we were driving through as prices were trading at -$65/MW as shown below. A question arose from an interested passenger, “why not just shut them off?”. The answer was they’ve probably already sold the production in the day-ahead or bilateral market, but that’s a story for another day and it ruins the narrative….for this ride, they were paying, instead of being paid, to produce MWs.