US EIA's short-term outlook finds that natural gas demand is outpacing supply

Strong natural gas export growth that persistently outpaces US production is driving higher gas prices in 2025 and 2026, compared with 2024, when spot prices averaged $2.19/MMBtu, the US Energy Information Administration said June 10.

The EIA's June Short-Term Energy Outlook estimated that Henry Hub spot prices will average $4.02/MMBtu in 2025 and $4.88/MMBtu in 2026, compared with the May forecast of $4.12/MMBtu in 2025 and $4.80/MMBtu in 2026.

"We expect that domestic consumption and exports combined will increase by nearly 4 Bcf/d this year, while US dry natural gas production grows by less than 3 Bcf/d," the EIA said. "Although natural gas inventories have recently moved above the five-year average, we expect that as demand persistently outpaces supply through much of this year, inventories will fall back below the five-year average by October, putting upward pressure on prices."

The agency estimated that total market natural gas production will average 115.9 Bcf/d in 2025, up 800 MMcf/d from its May number, but the EIA trimmed its forecast for the 2026 production average by 700 MMcf/d to 116.3 Bcf/d, with the Eagle Ford Basin area leading the 2026 easing. According to the EIA, the 2025 change reflects March results from monthly production survey data, which came in higher than expected, while the lowered 2026 estimate reflects an overall rig count forecast, pushing down the production forecast, particularly for 2026. The 2026 reduction is partly related to low oil prices and is most significant for the Permian and Eagle Ford forecasts, a spokesperson for EIA said.

A number of analysts, including the EIA, have moderated gas production forecasts among primarily oil-producing basins such as the Eagle Ford in light of many operators' intent to drill and complete fewer wells in 2025 than previously planned.

Gas consumption

Compared with the May forecast, the agency kept its gas consumption forecast level for 2025 at 91.3 Bcf/d while lifting the 2026 forecast by 400 MMcf/d to 91.1 Bcf/d. The EIA estimated that the US consumed 90.5 Bcf/d in 2024.

Adding to the demand are LNG exports that are expected to rise from an average of 11.9 Bcf/d in 2024 to 14.6 Bcf/d in 2025, before growing to 16 Bcf/d in 2026, according to the EIA.

In recent months, demand for LNG feedgas rose steadily and reached all-time highs this spring as the market added liquefaction capacity with the incremental commissioning of both Venture Global's Plaquemines LNG facility in Louisiana and Cheniere Energy's midscale expansion of Corpus Christi LNG in Texas.

Another large greenfield export facility, the ExxonMobil-QatarEnergy joint venture Golden Pass LNG, is planned to start up in late 2025.

In the near term, the EIA lowered its forecast for second-quarter Henry Hub natural gas spot prices by 20 cents to $3.26/MMBtu. The Q3 forecast also fell 18 cents from May's estimates to $4.01/MMBtu.

"We expect natural gas prices to increase throughout the summer as production declines slightly and demand for air conditioning increases the use of natural gas in the electric power sector," the agency said.

Despite a forecast that assumes about the same number of cooling-degree days this summer as last, the EIA is forecasting that the US power sector will use 3% less natural gas due to higher natural gas prices and level coal costs for generators.

"We expect the price of natural gas delivered to the power sector to average about $3.84/MMBtu from June through September, $1.39/MMBtu more than that period in 2024," the outlook said.

Compared with the May outlook, the agency raised its gas consumption estimates by 400 MMcf/d to 76.8 Bcf/d for Q2, and by 300 MMcf/d to 85 Bcf/d for Q3.

Power demand forecast

The EIA raised its forecast for US electricity demand growth for 2025 by about 1% to reflect an anticipated surge in demand growth in the commercial and industrial sectors, particularly from the expansion of data centers and manufacturing operations.

The agency now forecasts that US commercial sector electricity consumption will increase by 3% in 2025 and by 5% in 2026. This marks a significant upward revision from the May outlook, in which the EIA had forecast commercial power demand would grow by an annual average of 2% through 2026. The agency said the growth in power demand is notable in the Electric Reliability Council of Texas and PJM Interconnection markets.

As a result of the increased power demand, the EIA expects, in the near term, that total US electricity generation will increase by 1%, or 14 billion kWh, this summer compared with the summer of 2024. While gas-fired generation in the US is expected to be lower from June to September, nationwide solar generation is poised to grow by 33%, or 30 billion kWh, in the same period, the report said. The EIA forecasts a 6%, or 5 billion kWh, increase in US hydroelectric generation, citing improving water supply in the western states.

The EIA sees the largest summer-over-summer increase in power generation coming in ERCOT because of growing electricity demand from data centers and new manufacturing facilities in Texas. Gas-fired generation in the state is projected to fall this summer in response to solar growth and a smaller increase in wind generation, the report said.

The agency also expects the Midwest region to see less gas-fired generation as solar output increases. The Northwest is also expected to produce less gas generation in response to higher hydropower output, the report said. The EIA sees nuclear generation in the Southeast returning to normal levels after three reactors in the region experienced unplanned outages in summer 2024.