Energy Market Update: May 2026

The Shipley Energy Commercial Solutions Team is excited to share the May Energy Market Update to inform you of trends, weather, and other factors impacting the energy market.

Read the April 2026 Energy Market Update ->

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• Natural Gas Update
• Petroleum Update
• Electricity Update

Natural Gas Market Update

• May 2026 NYMEX expired at $2.559/MMBtu.
• The Lower 48 entered the April–October injection season with approximately 1,890 Bcf of natural gas in storage, about 3% above both last year and the five-year average. Despite a warm start to winter, a sharp cold spell in January—highlighted by Winter Storm Fern—drove a record 360 Bcf weekly withdrawal and briefly pushed inventories below average. However, milder weather in February and March reduced withdrawals, lifting storage levels back above average by early April. Lower seasonal demand also eased prices, with Henry Hub falling from $7.72/MMBtu in January to $3.04/MMBtu in March.

• A broadly warmer-than-normal cooling season is expected, driven in part by elevated overnight temperatures. Early summer heat may be tempered somewhat by increased rainfall, but conditions are forecast to trend warmer relative to averages as the season progresses. Additionally, the development of an El Niño pattern is likely to suppress hurricane activity.

• The data below shows a steady upward trend in U.S. natural gas fundamentals through 2027. Henry Hub prices rise from $2.19 in 2024 to a peak of $3.67 in 2026 before a slight dip to $3.59 in 2027. Dry gas production increases consistently from 103.07 Bcf/d to 112.60 Bcf/d, while consumption remains relatively stable in the low 90 Bcf/d range. LNG exports grow significantly from 11.9 Bcf/d to 18.6 Bcf/d, reflecting expanding global demand. Meanwhile, natural gas’s share of electricity generation declines modestly from 42% to around 39–40%, indicating gradual diversification of the power mix.

Factors impacting the natural gas markets currently:

• We are now in injection season and our biggest drivers for price volatility are weather and power generation
• The spread is widening between Henry Hub and International gas markets due to the impacts of the Strait of Hormuz being shut down, and the attack on Ras Laffan LNG facility in Qatar which destroyed 17% of Qatar’s total export capacity
• An additional risk is added to winter gas with the potential for upward pricing due to increased demand for US LNG in Europe and Asia

Action Advice:

We recommend locking in for longer terms (12-18-24 months) that would remove exposure to winter price risk.

Other rate options include Basis Only or NYMEX Lock deals to separate the two elements of your natural gas supply price to look for potential value vs standard Fixed pricing. For those who want to float their NYMEX, consider a cap and floor structure to economically manage your risk. Ask your Account Manager for details.

May 2026 Natural Gas NYMEX Settlement Price: $2.559/MMBtu
Last month: April 2026 Natural Gas NYMEX Settlement Price: $3.095/MMBtu
Last year: May 2025 Natural Gas NYMEX Settlement Price: $3.170/MMBtu

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Petroleum & Refined Products

Key Takeaways:

• Midwest refinery outages have pulled roughly one million barrels per day of capacity offline, tightening regional supply just as demand runs nearly 5% above last year.
• Prompt physical ULSD cash basis has hit an all time high of $1.15 premium over NYMEX futures.
• Geopolitical volatility from the Iran conflict continues to be the main swing factor on the flat price.
• We expect prompt strength to remain for the next 2–3 weeks, with PADD 2 the epicenter and PADD 1 backstop barrels coming over from Europe.
• Watch the Marathon Robinson restart and any softening in the BP Whiting labor situation—those will dictate the next moves.

Distillate Stocks Hit Tightest Levels of 2026

The latest EIA Weekly Petroleum Status Report has lit a fire under the distillate complex—U.S. distillate inventories drew another 4.5 million barrels for the week ending April 24, pushing the deficit to roughly 11% below the 5-year average, the widest gap of 2026 and a meaningful step down from the ~5% deficit we saw exiting February. Distillate production fell to 4.9 mbd as refinery utilization slipped to 89.6%, while trailing 4-week distillate demand of 4.0 mbd is running +4.8% YoY. Tightening supply walking straight into firm demand.

This has driven regional ULSD basis sharply higher, particularly in Group 3 and Chicago/Midwest, with prompt physical ULSD cash basis hitting an all time low of $-0.8000 (extremes in flat price levels close to $5 and steep backwardation prompting supplier to discount cash basis) then rallying to a cash basis all time high $1.15 premium over NYMEX futures. The screen itself continues to see steep backwardation, reflecting immediate physical tightness and expectations of further drawdowns through the back half of spring turnaround.

On the supply side, PADD 2 is carrying an unusually heavy refinery problem stack. BP Whiting (440 kbd, the largest refinery in the Midwest) has been operating under a USW lockout since March 19, then was briefly knocked offline in early May by a power outage that triggered a 40–80 cpg wholesale gasoline jolt across parts of MI, IN and IL. Layered on top, Phillips 66 Wood River (356 kbd) is in the back half of a 45-day turnaround, and Marathon Robinson (253 kbd) has been down for planned work since mid-March, targeted to restart mid-May. Combined, roughly ~1 MMbpd of Midwest crude capacity has been impaired at various points this spring.

A refinery turnaround is a scheduled, temporary shutdown of one or more processing units for comprehensive inspection, maintenance, and repairs. These planned outages—typically lasting 30–60 days and occurring every 3–5 years per unit—are necessary to ensure safe, reliable operation but temporarily reduce crude throughput and product output while they are underway.

PADD 1 isn’t any easier—East Coast distillate stocks ended March at ~28.1 MMbbl, down from ~34.5 MMbbl in late January, starting the shoulder season lean. The tell: the NW Europe → PADD 1 ULSD arbitrage has reopened, which only happens when the East Coast deficit gets wide enough to pull marginal European barrels across the Atlantic.

On the macro overlay, the 2026 Iran war / Strait of Hormuz disruption remains the biggest swing factor on flat price. Brent peaked near $130/bbl before the April 8 ceasefire triggered a sharp unwind—ULSD collapsed 66.6 cpg in a single session (-14.88%)—but volatility hasn’t left the building. EIA still has retail diesel averaging $4.80/gal in 2026 with distillate stocks below the 5-yr average for the entire forecast period.

Price Technicals — WTI Crude

WTI Crude continues to be rangebound as the push and pull of on-again/off-again Iran war headlines continue to whipsaw price action. We have been closely watching resistance at $112 and support in the $91.50–$98 range. On the downside, our near-term outlook targets $80–$85, with a move toward the mid-$70s: a realistic scenario by Q3/Q4 2026 should geopolitical risk premium continue to deflate and macro demand signals soften.

Price Technicals — HO/ULSD

Heating oil futures are similarly caught in a push and pull between tight physical fundamentals and the broader crude complex overhang. The fundamental backdrop outlined above argues for prompt strength, but the market is not operating in a vacuum—any sustained move lower in WTI will weigh on the flat price ceiling for distillates. Against that backdrop, we expect ULSD to trade within a $3.50–$3.80 range near term, with the upper end of that band contingent on continued inventory draws and PADD 2 supply disruptions persisting. Broader support sits at $3.25, a level that aligns with our lower WTI targets and represents a zone where physical buyers would likely step in aggressively given the structural tightness in the distillate market.

Price Technicals — RBOB Gasoline

RBOB presents a notably more constructive and bullish technical picture than its distillate counterpart, which makes intuitive seasonal sense as we move deeper into the summer driving demand season. Gasoline demand has historically proven resilient through the summer months, and we expect that pattern to hold in 2026—retail prices in the mid-$4/gallon range nationally are unlikely to meaningfully erode consumer driving behavior given current employment and mobility trends. On the chart, RBOB has been building a solid technical foundation, and we look for that constructive bias to continue. Strong support is established in the $3.00–$2.85 range for this summer, levels that correspond with both key technical retracements and the lower end of a range consistent with our broader WTI downside targets. Dips toward those levels should attract buying interest.

Action advice:

Our focus remains sharply locked in on the back end of the HO NYMEX curve. If the physical distillate tightness remains, we expect that back end of the curve to “roll-up.” It’s imperative to review with your account manager your fall/winter needs and keep a close eye on the winter strip price levels.

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Electricity Market Update