EIA: Expect higher natural gas prices

The U.S. Energy Information Administration (EIA) predicts a notable increase in natural gas prices in the coming years, primarily driven by growing demand outpacing supply. This surge in prices will be propelled by rising domestic consumption and a sharp increase in liquefied natural gas (LNG) exports, as well as tighter natural gas storage inventories.

According to the EIA’s January Short-Term Energy Outlook (STEO), the Henry Hub natural gas spot price—considered the benchmark for U.S. natural gas—will average $3.10 per million British thermal units (MMBtu) in 2025. By 2026, this price is expected to rise further, reaching $4.00/MMBtu, marking a substantial increase from the record lows seen in 2024. The price hikes are primarily driven by a demand spike that outstrips supply, with LNG exports playing a central role in this demand growth.

In 2025, total U.S. natural gas demand is forecast to rise by 3.2 billion cubic feet per day (Bcf/d), primarily due to a 2.1 Bcf/d increase in LNG exports. As a result, Henry Hub prices will see a sharp 43% increase, as demand exceeds supply. The LNG export boom is linked to the startup of several major export facilities, including Plaquemines LNG, Corpus Christi Stage 3, and Golden Pass LNG. These facilities, which will begin ramping up or start full operations over the next few years, are a direct response to growing global demand for U.S. natural gas, especially in markets like Europe and Asia.

As demand continues to rise, natural gas storage inventories are expected to fall, with the EIA projecting that by the third quarter of 2025, storage levels will dip below the five-year average. This would be a significant shift from the higher-than-average inventories of 2023 and 2024, which had helped to suppress prices in those years. With storage levels falling and demand outpacing supply, the market will likely experience upward price pressure for the foreseeable future.

The rise in domestic consumption is not just a result of exports. Residential and commercial consumption is expected to increase in 2025, bouncing back from a mild 2024. While electric power generation will see a decline in natural gas use due to the growth of renewable energy sources, industrial consumption will grow in 2026 as economic activity picks up and manufacturing expands.

On the supply side, U.S. natural gas production will also grow, but at a more modest pace. In 2025, production is expected to rise by 1%, reaching 104.5 Bcf/d, and will climb nearly 3% more in 2026 to 107.2 Bcf/d. This growth will be driven largely by the Permian Basin in 2025, where natural gas is often produced as a byproduct of crude oil drilling. In 2026, production growth will also be supported by the Haynesville Shale, a key area in the Gulf Coast region, which is seeing increased activity spurred by rising natural gas prices and demand from nearby LNG export terminals.