Feature: Price volatility to define US gas market as demand climbs

With rising demand for LNG and data center power, US natural gas market participants see a constructive commodity cycle in progress but expect big price swings to be a key feature that shapes producers' strategies to limit their downside price exposure in the years ahead.

While some gas-focused exploration and production companies have given the market a line of sight to production growth, operators are generally holding back to ensure they don't grow into a forward gas curve that evaporates by the time they are ready to add volumes.

Toby Rice, CEO of Appalachian producer and midstream operator EQT, said the commissioning of new LNG facilities over the next few years could slacken global gas markets and that US producers are likely to be careful not to add supply too quickly.

"We see it pretty healthy for the next couple of years but '27, '28 could get a little soft, and I think that's why you're seeing operators be a little bit more disciplined," Rice told Platts March 12. EQT has said it is not operating in growth mode in 2025.

"People are asking why -- we're showing them a $4.50 strip in '25. We're showing them a $4.50 strip in '26," Rice continued. "'Why aren't they adding more activity?' It's because, guess what, we've seen these prices before."

Volatile prices

After the Russia-Ukraine war kicked off in 2022, gas prices climbed substantially as the conflict impacted global commodity trade flows. Benchmark Henry Hub, which averaged $3.84/MMBtu in 2021, spiked to $6.38/MMBtu in 2022, according to data from Platts, part of S&P Global Commodity Insights.

The following year, Henry Hub fell by more than half on average to $2.53 and continued to slide to $2.24 in 2024, leading gas-focused E&Ps to trim output.

In recent months, prices have been on the climb in light of rising LNG feedgas demand and a series of extremely cold weather events that boosted demand for gas-fired heating, leading to several large draws on Lower 48 storage. In January, spot gas at Henry Hub jumped to nearly $13/MMBtu, the index's highest since the crippling winter storm event of February 2021.

In the forward market, the balance of the 2025 Henry Hub strip was $4.52/MMBtu as of March 14 assessments, up 20% over two months ago, Platts data showed.

Shifting storage balances have contributed to higher prices. As of March 7, US inventory stood at 1.698 Tcf, which is 230 Bcf, or 12%, below the five-year average of 1.928 Tcf, data from the US Energy Information Administration showed.

Gordon Huddleston, president of Haynesville Shale producer Aethon Energy, said how fast the volume of total available gas storage capacity grows relative to total supply and demand will be a significant factor determining volatility.

"Storage has remained relatively flat relative to the growth in both supply and demand, which means we have less cushion -- which means implicitly there's going to be more volatility," Huddleston said in an interview. "I think the challenge is going to be the back end of the curve never truly represents what supply and demand requires."

Demand outlook

Total Lower 48 gas demand is expected to approach 113 Bcf/d in 2025 and exceed 121 Bcf/d in 2028, compared with 107.8 Bcf/d in 2024, Commodity Insights North American gas analysts' latest projections show.

Export growth, especially LNG, is expected to drive overall gas demand growth over the coming years. US LNG feedgas demand averaged 13.2 Bcf/d in 2024 and is expected to rise 21% this year to 16 Bcf/d. By 2029, total export demand could rise another roughly 15 Bcf/d, Commodity Insights analysts forecast.

Mark Viviano, a managing partner with asset manager Kimmeridge, said low gas prices have limited interest in gas E&Ps within the equities markets but that volatility could be positive for gas stocks.

"People have been comfortable owning oil equities because you get these periods of time when oil goes to $100. It's an inflationary hedge in your portfolio," Viviano said March 11 during a panel at CERAWeek by S&P Global.

"I think we are going through a regime change where we're not necessarily saying gas is going to be $5, $6, $7 [per MMBtu] but ... we're going to see periods of higher volatility," he continued. "And that upside optionality, I think, is going to attract a lot of people back into natural gas equities that have been foregoing them for the last decade."