Natural gas
Natural gas prices
U.S. natural gas prices have been lower this year than we forecasted in previous STEOs earlier this year, with high volumes of natural gas put into storage so far this injection season (April–October). Although we expect natural gas prices to be generally lower than we were forecasting a few months ago, we still expect prices to rise from current levels, driven by tighter market balances. The U.S. benchmark Henry Hub spot price averaged almost $3.20 per million British thermal units (MMBtu) from April through July, $0.80/MMBtu below the April STEO forecast.
In our April STEO, we expected natural gas inventories in working gas storage to be 3% less than the five-year average at the end of the injection season on October 31. We now expect it to be about 2% higher than the five-year average. Our higher end-of-season storage forecast is largely the result of more natural gas production and fewer liquefied natural gas (LNG) exports than we had expected in April, with maintenance at multiple terminals extending over the second quarter. Because we expect more natural gas will be in storage in the coming months, we forecast prices will be lower. The Henry Hub price in this STEO averages around $3.60/MMBtu in 2H25 and $4.30 in 2026, which is 21% and 6% lower than we forecast in April, respectively. However, monthly forward price curves continue to reflect expectations of gradually increasing prices through the end of 2026. April has the lowest monthly average price in our 2026 forecast at around $3.60/MMBtu. We expect prices will rise from there, reaching more than $5.40/MMBtu in December.
Although our storage forecast is higher than it was in April, we still expect natural gas inventories to fall closer to the five-year average in the coming months, putting upward pressure on prices. After growing by more than 1 billion cubic feet per day (Bcf/d) from 1Q25 to 2Q25, dry natural gas production will fall by a similar amount over the next year. At the same time, we expect that LNG exports will grow around 2 Bcf/d, further tightening supply-demand balances and contributing to higher prices later in the forecast period.
Natural gas production
Rising natural gas production in recent months has added to higher-than-anticipated inventory levels. We expect marketed natural gas production to grow by 3% over 2024 volumes, supported by growth of 2 Bcf/d in the Permian region and 0.9 Bcf/d in each of the Haynesville and Appalachia regions in 2025. This growth has been sustained in part by the deployment of drilling rigs to natural gas-intensive shale plays. Baker Hughes reported on August 8 that 19 more active rigs were focused on drilling for natural gas than there were at the start of April, an 18% increase. The Haynesville region led the increase in natural gas-directed rig deployment.
We expect marketed natural gas production will be generally unchanged next year, even though we expect falling oil prices will reduce production of associated natural gas, particularly in the Permian Basin. However, production declines will be muted as producers strategically position themselves to meet rising demand from several LNG projects that are set to enter service in late 2025 and 2026. We forecast marketed annual natural gas production to remain flat in 2026 compared with 2025, when increased non-associated gas production from the Haynesville region (0.3 Bcf/d) and Appalachia (0.7 Bcf/d) offset declines Eagle Ford and relatively flat production in the Permian. In the Haynesville region, we expect production to remain near current levels through early 2026, before rising in the second quarter in response to LNG-related demand. The start of the Louisiana Energy Gateway pipeline, which is planned to enter service during this period, will support rising Haynesville output by improving takeaway capacity. Additional export capacity from the new Golden Pass facility and Plaquemines LNG Phase 2 are also set to come online over the next two years.