Opinion 1 — The Record Nobody Wants to Believe In — Weekend Edition

The Record Nobody Wants to Believe In The United States just produced 107 quadrillion BTUs of energy in 2025—the fourth consecutive annual record, a 3.4% increase from 2024's previous high. Natural gas hit 39 trillion cubic feet. Crude oil reached 13.6 million barrels per day. Natural gas plant liquids climbed to 4 trillion cubic feet, up 7% year-over-year. Every major fossil fuel category simultaneously set all-time highs while renewable energy also broke records. And yet, looking at futures markets and producer behavior, almost nobody is acting like they believe this growth will continue. Managed money positions tell the story. Speculators are net short 119,870 contracts on natural gas futures—they've added to shorts for the second consecutive week despite Henry Hub trading at $2.96, below most producers' all-in costs. WTI crude positioning dropped 2,373 contracts last week even as prices held above $100. The market is looking at four consecutive years of record-breaking production and betting it stops here. They might be right, but not for the reasons they think. The Efficiency Paradox Nobody's Pricing Buried in the EIA's industrial demand forecast is a detail that should be setting off alarm bells in both directions. Industrial natural gas consumption averaged 23.6 Bcf/d in 2025—a record. The forecast calls for 23.9 Bcf/d in 2026 and 24.3 Bcf/d in 2027. That's 1.2% growth this year, 1.7% next year. Modest, right? The kind of incremental demand that explains why gas producers aren't rushing to drill despite four years of production records. Except the EIA explicitly states these gains are happening *despite* "continued efficiency improvements" that "reduce the amount of natural gas needed per unit of output." Read that again. Industrial facilities are adopting more efficient process heaters and heat-recovery technologies—meaning they need less gas per widget—yet total consumption is still hitting records and projected to grow. This means the actual industrial buildout is substantially larger than the headline consumption numbers indicate. If you're getting 2-3% more efficient annually but consuming 1-2% more gas anyway, you're expanding physical capacity by 3-5%. The chemicals subsector, which dominates industrial gas demand, isn't just running existing plants harder. It's building new crackers, new ammonia plants, new hydrogen facilities at a pace that overwhelms multi-percentage-point efficiency gains. Futures markets are pricing gas at $2.96 like this is a temporary spike in a structurally oversupplied market. But if industrial capacity is expanding 3-5% annually in real terms, hidden behind efficiency improvements, the "oversupply" is an accounting illusion. We're not producing too much gas for current demand. We're producing exactly enough gas to mask that demand is structurally accelerating. The Permian Dependency Problem Crude oil's 3.4% production growth in 2025—350,000 barrels per day—came almost entirely from one place: the Permian Basin. Appalachia, Permian, and Haynesville drove natural gas growth. Strip out these three regions and U.S. production growth disappears. The Bakken is flat. Eagle Ford is declining. The Gulf of Mexico is steady but not expanding materially. This concentration creates a fragility that four consecutive records have papered over. The United States is now the world's largest crude producer and largest natural gas producer simultaneously, but both records depend on a shrinking geographic footprint. When the EIA forecasts industrial gas demand rising 0.3 Bcf/d this year and 0.4 Bcf/d next year, it's implicitly assuming Appalachia and Haynesville can deliver. When export forecasts assume continued LNG cargo growth to feed European storage (which needs 130 cargoes monthly), they're assuming Permian associated gas keeps flowing. But managed money doesn't believe it. Net short positioning on natural gas hit 119,870 contracts—speculators are betting production growth stalls or reverses. On crude, WTI positioning dropped despite $101 prices. The market is looking at four years of records and saying: "This is the top." They're not wrong to be skeptical. Four consecutive years of record production have occurred during a period of unprecedented price volatility—Brent spiked to $109 Friday, up 2.2%, while WTI fell 1.3% to $101. That spread reflects structural uncertainty. Natural gas jumped 1.3% to $2.96, which is below the marginal cost curve for most Haynesville producers. If you're an operator looking at these signals, you see demand setting records and prices sending "stop drilling" signals simultaneously. The Export Trap The United States became a net energy exporter in 2019, and that status depends on production growth outpacing domestic consumption. Total U.S. consumption hovers around 100 quads annually—it's been essentially flat for 15 years. The 107 quads produced in 2025 means 7 quads (roughly) flowed to export markets: LNG cargoes to Europe and Asia, crude to buyers worldwide, refined products everywhere. But here's the problem with being the swing supplier to the world: your customers don't want you to be one. Europe needs reliable LNG flows to hit 90% storage by November. Asian buyers need steady crude and LNG deliveries to avoid the shortages that sent JKM to $17.11 and kept it there. They don't want a supplier whose production growth depends on three shale basins that respond to price signals with a 3-6 month lag. And increasingly, U.S. producers don't want to be that supplier either. Four years of record production have been met with four years of price chaos. Brent has traded between $50 and $130 in that span. Henry Hub has bounced from $1.50 to $6.00. If you're a CFO who lived through 2020's negative WTI prices and 2022's gas spike, "record production" and "predictable returns" are opposite concepts. The futures curve reflects this standoff. Natural gas forwards are in contango—$2.96 spot, higher prices six months out—which normally signals "drill now, produce later." But producers aren't biting. They've learned that record production just means record volatility, and volatility destroys capital discipline. What Breaks First So we have industrial demand that's structurally growing faster than headline numbers suggest, export markets that need reliable supply growth, and producers who've delivered four consecutive records while watching their stock prices underperform the S&P 500. Something gives. Option one: Prices rise enough to force production growth. That means Henry Hub above $4.00 sustained, WTI above $110, and Brent above $120. Possible, but it requires either a major supply disruption (Iran escalation, hurricane season chaos) or demand growth that overwhelms current production. The industrial efficiency paradox suggests the demand is there, but it's hidden in per-unit improvements that make headline consumption growth look modest. Option two: Production growth stalls and exports get rationed. Europe doesn't hit 90% storage. Asian LNG buyers face shortages. Crude importers scramble. Prices spike, but by then it's too late—the 3-6 month drilling lag means Q4 2026 tightness can't be solved by Q2 2026 decisions. This is what managed money is betting on when they short gas and trim crude longs. Option three: Demand destruction. Industrial consumers hit efficiency limits or simply shut capacity when gas prices firm. European buyers ration consumption instead of refilling storage. Asian economies slow. The four-year production record ends not because supply failed, but because nobody wanted the marginal barrel or Bcf at market-clearing prices. I'd put money on option two. The efficiency paradox in industrial demand is real—you don't set consumption records while improving efficiency unless the underlying capacity growth is substantial. Export commitments are contractual, not optional. And producer psychology has shifted from "drill into price signals" to "protect returns at all costs." That means the fifth consecutive production record is unlikely. Not because U.S. shale can't deliver, but because producers don't trust the market to reward them for delivering. Four years of records have taught them that being the world's swing supplier means absorbing everyone else's volatility. The next time Europe needs 130 LNG cargoes monthly or Asia faces a supply crunch, they might find the swing supplier has left the building. The United States just set its fourth consecutive energy production record. Start the countdown to the year it doesn't.