Notes below are from BakerHostetler "Energy Watch" dated 7-23-2025 with my comments in blue.
The U.S. Energy Information Administration (EIA) reduced its Henry Hub natural gas spot price forecast for 2025 and 2026 in its latest short term energy outlook (STEO), which was released on July 8.
According to that STEO, the EIA sees the Henry Hub natural gas spot price averaging $3.67 per million British thermal units (MMBtu) in 2025 and $4.41 per MMBtu in 2026. The EIA’s previous STEO, which was released in June, projected that the Henry Hub natural gas spot price would average $4.02 per MMBtu this year and $4.88 per MMBtu next year. < My current oil and gas price deck is $3.73 for 2025 and $5.00 for 2026. Q1 2026 weather will be a primary driver of what the average gas price will be in 2026.
Both STEOs highlighted that the Henry Hub natural gas spot price came in at $2.19 per MMBtu in 2024. < The 5 years ending 12-31-2030 are going be very bullish for all of our gassers. I believe that U.S. natural gas prices will be close to 1/10th the price of WTI oil once North American LNG exports exceed 25 Bcf per day, which should happen by the end of 2028 based on the list of LNG export facilities that are fully approved. Several more are in the process of getting approval. By the end of 2030 total North American export capacity will be close to 25% of total U.S. + Canada natural gas production. Exports to Mexico via pipeline will also be increasing each year.
In its latest STEO, the EIA projected that the Henry Hub natural gas spot price will average $3.37 per MMBtu in the third quarter of this year, $3.99 per MMBtu in the fourth quarter, $4.46 per MMBtu in the first quarter of 2026, $3.76 per MMBtu in the second quarter, $4.35 per MMBtu in the third quarter, and $5.06 per MMBtu in the fourth quarter of next year.
The EIA’s previous STEO saw the Henry Hub natural gas spot price coming in at $4.01 per MMBtu in the third quarter, $4.67 per MMBtu in the fourth quarter, $5.35 per MMBtu in the first quarter of 2026, $4.39 per MMBtu in the second quarter, $4.87 per MMBtu in the third quarter, and 4.92 per MMBtu in the fourth quarter of next year.
“Compared with our June forecast, we expect more natural gas in storage in the coming months because of slightly more natural gas production and less power sector demand,” the EIA said in its latest STEO.
“As a result, we reduced our forecast for natural gas prices,” the EIA added.
In its STEO, the EIA noted that its forecast for more natural gas in storage and lower prices comes after seven consecutive weeks of net injections greater than 100 billion cubic feet contributed to a recovery in storage volumes.
“We estimate that U.S. natural gas inventories were seven percent above the five-year average (2020–2024) at the end of June after ending the withdrawal season (November–March) four percent below the five-year average, the lowest in three years,” the EIA said in its July STEO. < Comparing storage to the last 5 year average is misleading because the U.S. gas market is MUCH LARGER than it was 5 years ago, and the rate of demand growth is accelerating. Pipelines and infrastructure buildouts will have difficulty keeping up with demand growth.
“Injections have exceeded the five-year average as U.S. natural gas production has increased in the 2Q25 compared with 1Q25. We expect inventories will end the injection season on October 31 with 3,910 billion cubic feet of natural gas in storage, five percent more than we forecast in last month’s STEO and three percent more than the five-year average,” it added.
The EIA pointed out in the STEO that the Henry Hub spot price averaged just over $3.00 per MMBtu in June and highlighted that it expects the commodity will average “almost $3.40 per MMBtu in 3Q25, 16 percent less than last month’s forecast”.
“LNG demand and natural gas production will be two key drivers of price in the coming months,” the EIA added.
“If LNG demand is more or production is less than our forecast, inventories may end the injection season below our forecast and natural gas prices may be higher than forecast,” it continued.
“At the same time, with above-normal hurricane activity expected this summer, LNG exports may be disrupted if storms hit along the Gulf Coast, which could result in more U.S. inventories and lower natural gas prices than expected,” it went on to state.
The EIA noted in its July STEO that marketed natural gas production averaged 116.8 billion cubic feet per day (Bcfpd) in 2Q25, which it pointed out was a 4.7 Bcfpd increase compared with the same period in 2024.
“We expect production to remain near this level through 2026, averaging around 116 Bcfpd in both 2025 and 2026,” the EIA said in its STEO.
“Higher natural gas prices throughout 2025 compared with last year have supported this sustained production. The U.S. benchmark Henry Hub spot price averaged $3.67 per MMBtu in 1H25, compared with $2.11 per MMBtu in 1H24,” it added.
“Although production in our forecast remains relatively flat going forward, we forecast U.S. marketed natural gas production will increase almost three percent this year compared with 2024, largely because of rising production in the first half of the year,” it continued.
“This increase is driven mainly by the Permian region, which we expect to produce 27.0 Bcfpd in 2025, or six percent more than in 2024, along with increases in the Appalachia and Haynesville regions,” the EIA went on to state.
“We forecast U.S. marketed natural gas production will remain flat in 2026 as production growth from the Permian and Appalachia regions will offset the overall decline in production from the rest of the United States,” the EIA noted.
A research note sent to Rigzone by the JPM Commodities Research team on July 14 showed that J.P. Morgan expected the Henry Hub U.S. natural gas price to average $3.75 per MMBtu in 2025 and $3.31 per MMBtu in 2026. < It will take a very mild 2025/2026 winter to make this happen.
That note revealed that J.P. Morgan saw the commodity coming in at $4.00 per MMBtu in the third quarter of 2025, $3.75 per MMBtu in the fourth quarter, $3.50 per MMBtu in the first quarter of 2026, $3.00 per MMBtu in the second quarter, $3.25 per MMBtu in the third quarter, and $3.50 per MMBtu in the fourth quarter.
A report sent to Rigzone by the Standard Chartered Bank team on July 8 showed that Standard Chartered expected the NYMEX Basis Henry Hub U.S. natural gas nearby future price to average $3.35 per MMBtu this year and $3.30 per MMBtu next year.
In that report, Standard Chartered projected that the commodity would average $3.20 per MMBtu in the last quarter of 2025 and first quarter of 2026, $3.70 per MMBtu in the second quarter of next year, $3.50 per MMBtu in the third quarter, and $2.80 per MMBtu in the fourth quarter.
----------------------
Bottomline: Weather related demand will have a lot to do with where the natural gas price will be in 2026.
Dan Steffens
Energy Prospectus Group
Top |
