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- The benchmark U.S. natural gas price at Henry Hub has more than doubled in one year.
- EIA: The average rate of withdrawals from storage is 25% higher than the five-year average so far in the withdrawal season.
- Unlike in crude oil, money managers have become increasingly bullish on U.S. natural gas after inventories dipped this winter.
It’s “drill, baby, drill” time in the U.S. shale patch—but mostly for natural gas.
U.S. producers continue to keep oil output steady amid WTI Crude prices below $70 per barrel and aren’t breaking discipline just because the Trump Administration wants lower oil prices.
But the natural gas producers focused on the shale gas plays Appalachia, Marcellus, Haynesville, and the Eagle Ford have reasons to boost their output after a year in which many of them had to curtail production due to multi-year low prices.
Price Rally
The benchmark U.S. natural gas price at Henry Hub has more than doubled in one year—from $1.83 per million British thermal units (MMBtu) at this time in 2024 to over $4 per MMBtu this week.
So much has changed in 12 months in the U.S. natural gas sector to lead to the 160% surge in Henry Hub prices. A mild 2023/2024 winter was followed by the coldest winter in the U.S. for six years. Inventories that were sitting comfortably above average last year are now below the five-year average. Production remained relatively flat in 2024 – due to low natural gas prices and subsequent curtailments – compared to the previous year of record output, while demand surged with increased consumption for heating and power generation and record levels of U.S. LNG exports.
At the start of the winter heating season in November 2024, U.S. natural gas inventories were higher than average for the time of the year as America entered the season with stocks at their highest level since 2016.
These stocks, however, were quickly depleted during the coldest winter for six years. Two weeks before the end of the winter heating season, U.S. natural gas inventories have now slumped to below the five-year average and well below the levels from the same time in 2024.
In the week ending March 12, working natural gas stocks were 12% lower than the five-year average and 27% lower than last year at this time, the EIA said in its latest Natural Gas Weekly Update.
The average rate of withdrawals from storage is 25% higher than the five-year average so far in the withdrawal season, the administration’s data showed.
The lower inventories and the higher demand – both for domestic consumption and LNG exports – have pushed prices higher, encouraging producers to boost gas output this year.
Traders also bet that prices will go even higher as demand from LNG plants is set to accelerate with the ramp-up of new U.S. export facilities.
Unlike in crude oil, money managers have become increasingly bullish on U.S. natural gas after inventories dipped this winter.
Natural Gas Production Set To Rise
As a result of lower inventories and higher prices, natural gas producers expect to boost output later this year and in 2026.
For example, Expand Energy, the largest independent U.S. natural gas producer, said in its 2025 outlook at the end of February that it plans for daily production of approximately 7.1 Bcfe/d this year, up from about 6.41 Bcfe/d in the fourth quarter of 2024.
Expand Energy expects to exit 2025 at about 7.2 Bcfe/d productions, after turning in line substantially all productive capacity built in 2024.
“The company intends to build incremental productive capacity for an additional $300 million by running ~15 rigs in the second half of the year,” Expand Energy said.
“This positions the company to efficiently grow production from a year-end 2025 exit rate of approximately 7.2 Bcfe/d to average approximately 7.5 Bcfe/d in 2026 should market conditions warrant.”
U.S. Energy Secretary Chris Wright also expects natural gas production growth to outpace the growth in oil output, at least in the near term.
“Natural gas production will grow dramatically in the next two or three years,” Secretary Wright told Bloomberg in an interview last month.
Oil production is “probably not going to grow meaningfully in the short run,” Wright said, but added that it could see a more meaningful increase in five years.
Thanks to higher natural gas prices, U.S. dry natural gas production is set to rise by 2% in both 2025 and 2026, after holding flat in 2024, the EIA said in its Short-Term Energy Outlook (STEO) for March.
The EIA sees the Henry Hub price averaging around $4.20/MMBtu in 2025, which is 37% higher than the forecast in October.
The natural gas price is expected to average even higher in 2026—about $4.50/MMBtu, as global demand for LNG grows and U.S. LNG export facilities ramp up capacities.
Pipeline Takeaway Capacity Rises
The Trump Administration is vowing to ease pipeline infrastructure build-out, which would additionally help increase the takeaway capacity from the supply centers to the demand centers.
This capacity already grew in 2024 the most since 2021, EIA data shows.
Five projects completed in 2024 increased takeaway capacity by 6.5 billion cubic feet per day (Bcf/d) in the Appalachia, Haynesville, Permian, and Eagle Ford regions, to deliver natural gas to demand centers in the mid-Atlantic and along the U.S. Gulf Coast.
Another five pipeline projects completed last year in Texas and Louisiana increased capacity to deliver natural gas to U.S. LNG export terminals by approximately 8.5 Bcf/d.
Smaller interstate and intrastate pipeline projects added another nearly 3.0 Bcf/d combined of natural gas pipeline capacity for a total of 17.8 Bcf/d in new capacity in 2024.
By Tsvetana Paraskova for Oilprice.com
The post Price Rally Sets The Stage for U.S. Natural Gas Boom appeared first on Energy News Beat.
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