By Scott DiSavino
(Reuters) – U.S. natural gas producers will boost output in 2025 following a series of production cuts this 12 months, as rising demand from liquefied natural gas export plants is anticipated to extend prices that had fallen to multi-decade lows.
U.S. production is on target to say no in 2024 for the primary time since 2020, when the COVID pandemic reduced demand, in keeping with the U.S. Energy Information Administration’s latest outlook.
Drillers began cutting gas production after average spot monthly prices on the U.S. Henry Hub benchmark in Louisiana fell to a 32-year low in March, and have remained relatively low since then. In some markets, spot gas prices have even traded at negative levels all year long, meaning producers needed to pay others to take their product. [HH/GAS]
But rising demand for exports should boost average annual gas prices next 12 months by greater than 40% over the degrees seen in 2024, in keeping with analysts’ estimates.
The EIA projects annual average dry gas production will slide from a record 103.8 billion cubic feet per day (bcfd) in 2023 to 103.3 bcfd in 2024, but climb to 104.5 bcfd in 2025.
It expects total gas demand, including LNG and pipeline exports, will rise from a record 109.9 bcfd in 2023 to 111.2 bcfd in 2024 and 113.0 bcfd in 2025.
Most of 2025’s expected demand increase is attributable to a 14% jump in LNG exports, while domestic use – reminiscent of gas used for power generation – will likely see a decline.
From 2019 to 2023, U.S. LNG exports have soared by a median of 34% per 12 months, while domestic gas usage has edged up by just 2% a 12 months.
Two plants under construction are attributable to enter service in test mode by the top of this 12 months, including the primary 1.8-bcfd phase of Enterprise Global’s Plaquemines facility in Louisiana and the 1.5-bcfd Stage 3 expansion at Cheniere Energy’s Corpus Christi facility in Texas.
WAITING FOR HIGHER PRICES
To fulfill growing export demand, several of the largest U.S. gas producers said of their third-quarter earnings that they expect to spice up output within the fourth quarter and throughout 2025.
“Producers are waiting for higher prices to deliver several bcfd of production held back … the likely start-up of Plaquemines and Corpus Christi Stage 3 should result in much higher flows next 12 months,” analysts at Bank of America said in a report.
Analysts forecast average annual Henry Hub gas prices would jump to a three-year high of around $3.27 per million British thermal units in 2025, up from a four-year low of $2.29 in 2024. [HH/GAS]
“The mix of growing LNG exports, increased electrical generation demand and the prospect of winter weather suggests a tighter supply-demand picture for natural gas in 2025 and beyond,” Thomas Jorden, the CEO at Coterra Energy, told analysts on a call to debate the producer’s earnings.