Key information
- The U.S. Energy Information Administration (EIA) forecasts a decline in natural gas production in 2024.
- Increased export demand is expected to cause average annual natural gas prices to rise more than 40 percent next year compared to 2024 levels.
- Two new LNG export facilities are expected to be operational this year, and several major U.S. natural gas producers have signaled plans to increase production in the fourth quarter of 2023 and throughout 2025.
Production increase planned
U.S. natural gas production is expected to increase in 2025 after a year of reductions. This development is due to the expected increase in demand from liquefied natural gas (LNG) export facilities, which will likely drive prices higher after a multi-decade trough period.
Expected production decline
The U.S. Energy Information Administration (EIA) projects natural gas production will decline in 2024 for the first time since 2020, when the COVID-19 pandemic significantly reduced demand. In 2023, average monthly spot prices at the Henry Hub benchmark in Louisiana reached a 32-year low in March and remained relatively low throughout the year. In some markets, gas prices have even plunged into negative territory, forcing producers to pay for buyers to take their product.
Increase in demand and prices expected
However, according to analyst forecasts, growing demand for exports is expected to cause average annual natural gas prices to rise by more than 40% next year compared to 2024. The EIA anticipates a decline in production of dry gas, increasing from 103.8 billion cubic feet per day (bcfd) in 2023 to 103.3 bcfd in 2024, followed by a recovery to 104.5 bcfd in 2025.
Expected increase in LNG exports
The increase in demand forecast for 2025 is largely attributed to a 14 percent rise in LNG exports, while domestic consumption, such as gas used for power generation, is expected to decline. From 2019 to 2023, U.S. LNG exports grew by an average of 34 percent per year, while domestic gas consumption grew only 2 percent per year.
New LNG export facilities
Two new LNG export facilities are expected to come online this year: Venture Global's facility in Plaquemines, Louisiana, and Cheniere Energy's expansion in Corpus Christi, Texas. To meet growing export demand, several major U.S. natural gas producers have announced plans to increase production in the fourth quarter of 2023 and throughout 2025.
Planned price increase
Analysts anticipate average annual gas prices at the Henry Hub will reach a three-year high of around $3.27 per million British thermal units in 2025, after hitting a four-year low of $2.29 in 2024. This expected increase would be mainly due to increased LNG exports, anticipated growth in electricity demand and the potential effects of winter cold spells.
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