COMMODITIES 2025: US gas E&Ps await opening to further boost production

This is part of the COMMODITIES 2025 series where our reporters bring to you key themes that will drive commodities markets in 2025.

US gas-focused E&P companies are expected to raise production levels in 2025 when supply-demand fundamentals tighten, but the timing and volume will have everything to do with the winter's severity and the ramp in operations at new LNG export projects, according to market players.

For the gas market, 2024 was largely defined by oversupply and weak prices, which hit multiyear lows early in the year. In February, prompt-month NYMEX Henry Hub futures fell below $1.60/MMBtu, their lowest since the onset of the pandemic in 2020, leading operators to begin holding back production by deferring well completions and turn-in-lines.

As the year ticked by with still low prices, operators slowed activity by dropping rigs or, in the case of Appalachian producer Coterra Energy, eventually giving up gas-directed drilling activity altogether for the time being.

In recent weeks, prices have risen and volumes have already started to climb with the arrival of winter. Season to date, modeled dry gas production has risen to nearly 103 Bcf/d, up from the September-October average of 101.8 Bcf/d, S&P Global Commodity Insights data showed.

Operators are now looking for a runway to further increase volumes with the next boost in demand, especially from rising LNG exports.

Price, demand signals

Continued weak pricing throughout the year pushed operators to continue with curtailments into and through the fourth quarter. Antero Resources pushed the completion of two pads of drilled-but-uncompleted wells to 2025.

Other operators, including EOG Resources, Range Resources and Expand Energy, said they would also continue to defer gas wells through year's end in anticipation of better pricing.

Weather patterns over the next few months will be a primary factor in determining when to begin converting wells in progress to wells in production, Range CEO Dennis Degner told analysts on the company's third-quarter earnings call in October.

In recent weeks, wintry weather has caused demand for gas-fired heating to surge and yielded a couple of larger-than-average withdrawals from Lower 48 gas storage, bringing inventory's surplus to the five-year average closer to par. The conditions have also helped to jolt the gas futures market, with January 2025 settling Dec. 20 at $3.74/MMBtu, up 23% from its recent low of $3.04, although the prompt contract was down 7-8 cents in the afternoon of Dec. 23 to $3.67, intraday data from CME Group showed.

"I think the other thing we need to see is further commissioning and utilization of the LNG infrastructure," Degner also said.

Most operators have also said they see 2025 as more positive as several new LNG export projects enter the fray, which is starting to happen. Venture Global's Plaquemines LNG facility has recently begun taking more feedgas and producing LNG.

With rising LNG exports, BofA Securities commodity analysts projected gas balances will tighten and demand growth will likely outpace supply in 2025 as capital expenditure cuts "start to bite," according to an outlook dated Dec. 3.

The analysts estimated gas production will rise by 2.8 Bcf/d next year alongside demand growth of 3.1 Bcf/d.

Currently, production remains well off highs recorded last winter near 106 Bcf/d but is on track to exit December at a rate around 104 Bcf/d, according to Commodity Insights data. For the months ahead, Commodity Insights' North American gas analysts project monthly production to surpass 105 Bcf/d in May 2025 and to break through 107 Bcf/d by November 2025, according to their latest short-term market outlook updated Dec. 20.

LNG timing

With Plaquemines LNG nearing shipment of its first cargo, Cheniere Energy's 10 million mt/year Corpus Christi Stage 3 expansion in Texas stands next in line. Cheniere last advised that it expects to produce first LNG by year-end.

The 18 million mt/year ExxonMobil-QatarEnergy partnership, Golden Pass LNG, is expected to follow with a startup target of late 2025.

In all, Commodity Insights projects LNG feedgas demand will rise from 13.2 Bcf/d in 2024 to nearly 16 Bcf/d in 2025 and more than 19 Bcf/d in 2026.

Some market participants also anticipate that operators' pullback in 2024 could drive an imbalance in the market depending on how quickly demand grows. Commodity Insights' gas market analysts assessed that production "is expected to play catch-up" through next year to hold pace with an approximately 6 Bcf/d boost in US Lower 48 LNG exports between October 2024 and March 2026.

Gabriele Sorbara, an energy equities analyst with Siebert Williams Shank, said it's possible that demand growth significantly outpaces supply in 2025 if the winter is especially cold and gas storage is drawn way down.

"I think it's very easy to grow. I don't think we're going to have that problem just yet," Sorbara told Commodity Insights. "At some point, I think it's going to occur. I don't think it's a '25 event. I think that could be '26, '27, '28 when we really see that LNG demand."