The fundamentals behind summer’s strong gas injections

2025 has largely played out as expected from a fundamentals perspective. Yet, many in the market were surprised by the large natural gas storage injections seen in May and June, even as prices dropped and supply balances tightened.

Back in March, we projected a +580 BCF injection for May and +382 BCF for June. At that time, the summer strip was trading near $4.65, and storage was expected to reach containment before the end of the season.

Since then, prices have fallen significantly, tightening balances and reducing the likelihood of containment. But the actual injections were still substantial: +502 BCF in May and +342 BCF in June. Over a 9-week period from late April to late June, injections averaged a strong +107 BCF per week.

So why are things so loose?

Market focus on load growth missed a key factor

Power demand has been growing steadily, driven in part by booming data center load. On a cooling degree day (CDD) basis, total load is up roughly 2 percent compared to summer 2024, matching forecasts.

However, while overall load is up, gas burns for power generation are down about 10 percent per CDD compared to last year. This disconnect is critical.

The market has focused heavily on total load growth but overlooked two important factors:

• Renewables are growing faster than expected

• Coal-to-gas switching is still very much alive

Both of these are suppressing gas demand this summer.

Renewables are making a bigger impact

Solar generation has jumped about 30 percent this year, adding roughly 10 GW of capacity, which displaces around 5 BCF of gas demand equivalent.

Wind generation was strong in Q2, with output exceeding 2024’s highs, and this trend has continued into Q3, further limiting gas-fired generation.

Coal-to-gas switching is far from over

Despite many claims to the contrary, coal-to-gas switching remains a meaningful driver of gas demand. It may not be as large as in past years, but it still responds strongly to gas price movements.

Over the past three years, gas has gained or lost about 3 percent of the thermal generation stack for every $1 change in Henry Hub prices. This summer, gas’s share of the thermal stack averages 70 percent, down from 72.5 percent last summer when prices were $1.20 lower.

So coal-to-gas switching continues to shape gas demand, quietly but materially.

In summary, total power demand is up this summer, but gas demand is down because renewables are growing rapidly and coal-to-gas switching remains a factor. This explains why we are seeing large gas storage injections despite tightening markets and falling prices.

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