Posted: August 7, 2026, 3:20 pm

Market Divergence Continues

We apologize in advance for the truncated version of the WPO this week. Technical difficulties is our reason.

In the past weeks we’ve pointed out the divergence of ERCOT with MISO and PJM in the futures market. If we were somewhat puzzled back then, the continued gap could be perplexing. Obviously it’s the weather given the heat in the Midwest and East? Well, so much for that thesis as the maps below show normal summer temps except for the south including ERCOT. If it’s not the heat, we are left with natural gas. ERCOT more than any other ISO correlates with natural gas right now. More on that below from Pinebrook.

Natural Gas Market Commentary

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Natural gas futures continued to drift lower this week, with the recent downtrend becoming more pronounced. Winter 2026–27 fell to a fresh four-year low below $3.45 per MMBtu on Thursday before recovering modestly Friday morning. The strip traded as high as $4.75 per MMBtu in March but has since finished lower in 16 of the past 20 weeks.

Despite intense near-term heat in the forecast, the market is firmly looking past the remainder of summer and toward the upcoming shoulder season and healthy storage inventories. Yesterday’s storage report showed a 33-Bcf build into underground stocks, expanding the surplus to the five-year average to 195 Bcf, its widest in nearly a year. Inventories are virtually in line with year-ago levels and appear on pace to reach an end-of-season peak near or above 3.9 Tcf. This has largely quelled concerns about potential inventory shortages heading into winter.

With the end of summer in sight and natural gas demand remaining relatively muted even during periods of extreme heat, the market appears to have navigated the season comfortably. LNG export demand is likely to recover from its seasonal slump in the coming weeks and months, which should provide some support for prices. Even so, absent a material shift in weather or supply, healthy inventories are likely to keep rallies contained as the market transitions into fall.

Cocktail Corner

This week’s Cocktail Corner tidbit comes from Bloomberg commodities columnist Javier Blas. The June data is in and the US accounted for 60% of Europe’s LNG imports and 30% of Japan’s oil imports.

This week when standing in the circle with a drink in your hand and someone raises the most important invention in the last 25 years, it’s almost a given the internet will be the consensus, but if you’re feeling bold, suggest horizontal fracking.