Introduction
Natural gas markets have entered a period of relative stability following the extreme volatility experienced in recent years. For commercial and institutional consumers, this creates a critical strategic question: is now the right time to lock in prices, or should organizations remain exposed to market fluctuations?
The answer is not straightforward. Effective procurement decisions depend on a combination of market fundamentals, organizational risk tolerance, and long-term energy strategy. As we move into the 2026–2028 period, several structural changes are shaping the trajectory of natural gas prices
Understanding these dynamics is essential for making informed and cost-effective procurement decisions.
Market Snapshot: Where Are Prices Today?
Over the past year, North American natural gas prices have moderated compared to the elevated levels observed during recent winter peaks. One of the primary contributors to this stability has been storage levels consistently remaining above the 5-year average, reducing immediate concerns around supply shortages.
In addition, relatively mild weather patterns and steady production from major shale basins have helped maintain a balanced market environment. These conditions have contributed to a perception of short-term price stability, leading many organizations to adopt a “wait-and-see” approach.
However, this current stability should not be interpreted as long-term certainty. The natural gas market is undergoing structural changes, and underlying risks are gradually building beneath the surface.
Key Drivers Shaping 2026–2028 Prices
1. LNG Export Growth
One of the most significant structural developments in the natural gas market is the rapid expansion of liquefied natural gas (LNG) export capacity across North America.
Projects such as LNG Canada are expected to materially increase demand for Canadian natural gas. As export infrastructure expands, a larger share of North American supply will be directed toward international markets.
This shift introduces a fundamental change in pricing dynamics. Historically, North American gas prices were primarily driven by domestic supply and demand conditions. Going forward, prices are likely to become increasingly influenced by global market forces, including demand from Europe and Asia.
As a result, periods of global supply tightness or geopolitical disruptions may have a more pronounced impact on domestic pricing than in previous years.
2. Rising Power Generation Demand
Natural gas continues to play a central role in electricity generation, particularly as jurisdictions transition away from coal-fired power and expand renewable energy capacity.
While renewable sources such as wind and solar are growing, their intermittent nature necessitates reliable backup generation. Natural gas-fired plants are often used to provide this stability, especially during periods of peak demand or low renewable output.
In addition, the continued growth of data centers, electrification initiatives, and industrial activity are contributing to increased baseline demand for electricity—and, by extension, natural gas.
This sustained demand growth is expected to provide long-term support for natural gas prices, even in periods of short-term market softness.
3. Storage and Weather Volatility
Despite current storage levels being above historical averages, weather remains the most significant short-term driver of natural gas price volatility.
A colder-than-normal winter can rapidly deplete storage inventories, shifting the market from a position of surplus to deficit within a short period. This often results in sharp price increases, particularly during peak heating demand months.
Conversely, milder winters can temporarily suppress prices by reducing consumption and allowing storage levels to remain elevated.
This cyclical variability underscores the importance of incorporating risk management into procurement strategies. Relying solely on current market conditions without accounting for seasonal volatility can expose organizations to significant cost fluctuations.
4. Production Discipline and Supply Constraints
In recent years, natural gas producers have demonstrated increased financial discipline, prioritizing profitability and capital efficiency over aggressive production growth.
While this approach has contributed to market stability, it also introduces a potential constraint on future supply responsiveness. In previous cycles, rising prices often triggered rapid increases in production, helping to stabilize the market.
However, under current conditions, supply may not respond as quickly to increased demand. This could amplify upward price movements during periods of market tightness, particularly when combined with growing export demand.
Fixed vs Floating: What Strategy Makes Sense?
Fixed Contracts (12–36 Months)
Locking in natural gas prices through fixed contracts offers several advantages:
- Budget certainty and cost predictability
- Protection against short-term price spikes
- Simplified financial planning and forecasting
At present, forward pricing for the 2026–2028 period remains moderate relative to historical highs. This presents an opportunity for organizations to secure pricing before the full impact of LNG-driven demand growth is realized.
However, fully fixing 100% of consumption may limit flexibility, particularly if near-term market softness persists.
Floating / Index-Based Strategy
Index-based or floating pricing allows organizations to remain exposed to market movements.
This approach offers:
- The ability to benefit from short-term price declines
- Greater flexibility in procurement timing
- Opportunities to capitalize on favorable market conditions
That said, this strategy carries inherent risk. As structural demand drivers strengthen, prolonged exposure to the market may result in higher overall costs over time.
A Balanced Approach: Layered Procurement
Rather than choosing between fixed and floating strategies, many organizations are adopting a layered procurement approach.
This strategy involves:
- Securing a portion of anticipated consumption at current forward prices
- Maintaining partial exposure to index pricing
- Gradually increasing hedged positions over time
By spreading procurement decisions across multiple timeframes, organizations can reduce the risk associated with market timing while maintaining flexibility to respond to changing conditions.
This approach aligns procurement strategy with evolving market fundamentals and supports more stable long-term cost management.
Additional Considerations for Procurement Planning
Beyond pricing strategy, several additional factors should be considered when developing a natural gas procurement plan:
Contract Structure and Flexibility
Organizations should evaluate contract terms carefully, including volume flexibility, swing provisions, and penalties for deviations. Flexible contracts can provide additional value in uncertain market conditions.
Budgeting and Forecasting
Energy budgets should incorporate realistic assumptions around price variability, seasonal demand, and potential market disruptions. Scenario-based planning can help organizations prepare for a range of outcomes.
Data and Market Intelligence
Access to reliable market data and analysis is critical for informed decision-making. Monitoring forward curves, storage reports, production numbers, and demand indicators enables organizations to adjust strategies proactively.
What Should You Do Right Now?
Based on current market conditions and forward-looking fundamentals:
- Prices are not at historical lows, but remain reasonable relative to long-term risk
- Structural drivers, including LNG exports and demand growth, suggest upward pressure over the medium term
- Short-term market softness may still create tactical procurement opportunities
For most organizations, the optimal approach is not to delay decisions indefinitely, but to begin building positions gradually through a structured procurement strategy.
Conclusion
The natural gas market is entering a transitional phase. While current pricing reflects relative stability, underlying fundamentals indicate increasing pressure in the years ahead.
Attempting to time the market perfectly is rarely successful. Instead, organizations should focus on developing a structured, data-driven procurement strategy that balances risk and opportunity.
Through a combination of market expertise and technical optimization, NUS Consulting helps clients implement tailored energy procurement strategies that drive sustainable cost savings and improved budget predictability.