EIA expects higher wholesale U.S. natural gas prices as demand increases

In-depth analysis

January 23, 2025

We expect increases in the Henry Hub natural gas price in 2025 and 2026 as demand for natural gas grows faster than supply, driven mainly by more demand from U.S. liquefied natural gas (LNG) export facilities, reducing the natural gas in storage compared with the last two years. In our January Short-Term Energy Outlook (STEO), we forecast the U.S. benchmark Henry Hub natural gas spot price to increase in 2025 to average $3.10 per million British thermal units (MMBtu) and in 2026 to average $4.00/MMBtu from the record low set in 2024.

In 2025, we expect increases in demand, which includes domestic natural gas consumption and exports, will exceed increases in supply, which includes domestic natural gas production and imports. Consumption and exports increase by almost 3%, or 3.2 billion cubic feet per day (Bcf/d), in our forecast, outpacing the 1.4 Bcf/d growth in production and imports, leading to a 43% increase in the Henry Hub price. In 2026, we expect demand to continue to grow faster than supply, increasing prices by an additional 27%.

Because of more demand relative to supply, storage inventories go from being 6% above the five-year (2019-23) average in December 2024 to below the rolling five-year average in the third quarter of 2025, and inventories remain below the rolling five-year average for the rest of our forecast. By comparison, U.S. storage inventories of natural gas were relatively high in 2023 and 2024.

Demand increase driven by more LNG exports

Total U.S. demand for natural gas increases in 2025 by 3.2 Bcf/d and in 2026 by an additional 2.6 Bcf/d in our forecast, driven by more demand for natural gas for LNG exports. In 2025, LNG exports grow by 2.1 Bcf/d and in 2026 they grow by an additional 2.1 Bcf/d. The increase is the result of the start-up of three new LNG export facilities: Plaquemines LNG, Corpus Christi Stage 3, and Golden Pass LNG. Plaquemines LNG and Corpus Christi Stage 3 will continue ramping up to full operations in our forecast period, and we expect Golden Pass LNG to begin operations by the middle of 2026.

Our forecast of U.S. domestic consumption of natural gas remains flat in both years as declining electric power consumption with more renewables online is mostly offset by increases in residential and commercial consumption in 2025 and an increase in industrial consumption in 2026. Residential and commercial consumption of natural gas increases 7% in 2025 to 22.5 Bcf/d, which is closer to the five-year average of 22.3 Bcf/d than the consumption in 2024 of 21.0 Bcf/d. Consumption was low in 2024 because of mild weather in some months in the winter. Our forecast for 2025 includes closer-to-normal temperatures leading to comparatively higher consumption. Industrial consumption of natural gas increases in 2026 in our forecast because of increased industrial activity, measured by the natural gas-weighted manufacturing index. The largest decrease in natural gas demand in our forecast comes from electric power generation. The decline in consumption in this sector in 2025 and in 2026 is driven by increasing natural gas prices and increasing power generation from renewable sources.

Supply increase driven by production increases in the Permian and Haynesville regions

Dry natural gas production is the driver of supply growth in our forecast, increasing by 1% to 104.5 Bcf/d in 2025 and by nearly 3% to 107.2 Bcf/d in 2026. The increase in production comes mainly from the Permian region in 2025 and from the Haynesville and Permian regions in 2026. Growth in the Permian region follows increased crude oil production because most natural gas production in the Permian is associated gas production. Growth in Haynesville production in 2026 is driven by higher natural gas prices and increased demand from nearby new LNG export projects in the Gulf Coast region.

U.S. natural gas inventories were above their rolling five-year averages for all of 2023 and 2024, driving down natural gas spot prices in both years and contributing to multiple monthly record lows set in 2024. Because we expect demand to exceed supply over the next two years, the natural gas spot price increases in our forecast, and natural gas inventories fall below rolling averages starting in 2025 and continuing into 2026.

Principal contributors: Corrina Ricker, Andrew Iraola

Tags: wholesale prices, natural gas, consumption/demand, STEO (Short-Term Energy Outlook), forecasts/projections, Henry Hub

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