A combination of slow production growth and rising demand will cause US natural gas prices to rise more than 50pc by January, the US Energy Information Administration (EIA) predicted today.
Henry Hub spot prices will rise to an estimated $4.60/mmBtu by January, up from an average $3/mmBtu in the third quarter, EIA said Tuesday in its monthly Short-Term Energy Outlook (STEO). If realized, that would be the highest price since 2022.
EIA expects prices to rise because storage levels will be drawn down at a faster-than-normal rate this winter due to rising LNG exports and flat production in the lower 48 states. US inventories ended August about 6pc higher than the five-year average, but the EIA expects that to shrink to just 1pc by the end of March 2026.
"By 2026, we forecast natural gas prices will be nearly double compared to 2024," EIA said.
Decreases in associated gas output will accelerate as Permian production peaks and slows, offsetting drilling gains in other areas.
EIA expects production from the Eagle Ford shale play in Texas and the Bakken in North Dakota to fall by a combined 1.3 Bcf/d (37mn m³) next year, offset by a 0.8 Bcf/d gain in the Appalachian and Haynesville regions.
LNG continues to be the largest source of demand growth for gas produced in the US, the report said. The EIA forecasts exports to increase by 36pc to 4.3 Bcf/d by 2026, outpacing 1 Bcf/d of domestic production growth in the same period.
Baseload LNG export capacity is expected to further increase by 53pc to 6 Bcf/d when the Golden Pass I terminal comes online at the end of 2026, the agency added.
Despite higher electricity demand, domestic gas consumption is expected to increase by just 1pc to 91.4 Bcf/d. Although power will still account for about 40pc of domestic consumption, that is being tempered by an increasing amount of wind and solar on power grids in states like Texas.
The report noted that relatively higher gas prices are encouraging some operators to switch to coal-fired generation, which will see its first year-over-year increase since 2021. Overall gas-fired power generation is expected to fall by about 3pc in 2025, or 61bn kWh less than last year, EIA said.
