Posted: June 26, 2026, 12:01 pm

USA- 250

The 250th birthday is going to be one hot party, figuratively and literally. As we head into what will be a week long celebration for a lot of folks, the Midwest and East is looking at day time highs heading to the lower to mid 90’s. This already has PJM and MISO putting out hot weather alerts. Transmission and grid operators can expect plenty of capacity advisories, and even some demand response customers could be called to cut load. Not the ideal week for this, but unlike January, there is a cool lake somewhere with an even cooler drink in hand. Enjoy the week ahead!

Cheap Gas- What to do?

In the past we’ve discussed negative LMP electricity pricing and even some negative natural gas pricing. Spot real time LMP prices being negative isn’t all that uncommon, especially in high generation low transmission places like the Midwest where wind turbines can spin when electricity demand isn’t that great. Less common for negative pricing is the world of natural gas, except for the great state of Texas and the Permian Basin of West Texas, obviously made famous by Tyler Sheridan, Billy Bob Thornton, and Ali Larter.

Permian gas trades at the Waha Hub. Looking at figure below, EIA shows 2024/25 Waha trading significantly below the rest of the trading hubs. Just looking at daily settlements, Waha settled below zero 49 times in 2024 and 39 times in 2025. So far through May, it has settled below zero 87 times this year already. On a side note, different sources can quote different gas prices (day ahead cash, index, intraday spot, futures, etc) so you may not get the same numbers depending on the source, but they will all show the same overall picture.

So what’s up with Waha? The number one reason gas has traded below zero is there is just isn’t enough pipeline capacity to get the gas out. Right now, marketed gas is roughly equal to the pipeline capacity of the region, but because of things like weather or maintenance, the capacity is sometimes not equal to production, and like LMPs, the market turns negative.

Add to the capacity issue, below shows that the Permian wells are producing more and more gas. While we won’t get into a geology discussion here, there is something called GOR, or Gas-Oil Ratio which simply states that as the easy oil is taken out of a well, the amount of gas increases in relation to oil extraction . The charts below show that GOR is rising in the Permian, basically producing more gas with each barrel of oil extracted.

So, if capacity to move the gas is limited at the same time production is increasing as a byproduct of oil extraction, what to do? One crazy, and long time idea, has been bring the industry to the gas! Co-gen, glass, cement, fertilizer, petrochemical have all had a look at the Permian. In the end, they’ve all been met with trading one transportation solution for another problem. Fertilizer is a great example as it requires large amounts of natural gas to process. That said, trying to bring potash in and finished fertilizer out of the West Texas is more expensive than the savings on natural gas, even if gas trades negative.

What if, your export could be handled by dense fiber network lines that could be laid on existing right of ways? If that were the case, you could co-locate generation using cheap gas to power hyperscaler data centers! Well, that’s exactly is happening. This week Microsoft and Chevron announced an agreement where Chevron will develop a power facility in West Texas that will provide dedicated electricity to a Microsoft-operated data center under a 20- year power purchase agreement. This is no small data center/generation and when fully operational is expected to offer roughly 2.7 GW of capacity.

The data center and hyperscaler kerfuffle isn’t going away so Microsoft released a long blog explanation on the Community First benefits of the data center. This is the same gameplan as they used in Wisconsin, and for the most part, has had little outrage press associated. At the end of the day, cheap electricity is going to find these kinds of projects and it’s fair to assume there is more to come.

Natural Gas Market Commentary

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As we enter the heart of the summer season, the natural gas market is still seeking direction. Price action throughout June has maintained a sideways bias, with benchmark futures bouncing mostly between $3.00 and $3.30 per MMBtu. However, with major heat in the forecast for next week, we may finally be seeing a move toward a breakout. Friday marks the final day of trading for July 2026 NYMEX futures, and as of this morning, the contract is trading at its highest level since rolling to the front of the forward curve last month, pushing above $3.35 per MMBtu. With August set to move into the prompt position Monday at only a slight discount, the key question is whether this latest swell of bullish sentiment will carry into next week.

Current forecasts show the most significant heat of the season so far arriving during the final days of June and continuing into the Fourth of July. From there, anomalies soften, but temperature outlooks maintain a warmer-than-normal bias across the populous eastern two-thirds of the country at least through the first week of July. Whether that pattern holds deeper into the month will go a long way toward dictating market bias as the season progresses.

With LNG export demand nearly fully recovered from spring maintenance, production still holding steady, and generation demand set to spike, the coming weeks should be telling. If inventories can maintain their healthy surplus to the five-year average, rangebound trade could continue. But if that surplus erodes and stocks continue losing ground to year-ago levels, we may be in store for some summer fireworks.

Cocktail Corner

Perhaps not a cocktail, but nothing says 4th of July like a good ole USA cold beer. This weekend as the BBQ is raging and you feel a warm breeze and are looking for conversation, we can not trade wind. Trading “stuff” is another thing we do in the USA. We’ve commented about how you can trade just about everything and this week the CME proposed contracts on covering wind in ERCOT and some other countries. These contracts will settle on data that models theoretical wind power generation at a location. Trading wind isn’t new, but it hasn’t been as an exchange instrument instead bilateral contracts with some agreed upon settlement. Weather futures have been tried before and didn’t get much traction, we shall see on this one.