Natural gas price forecast up on demand
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EIA February Short-Term Energy Outlook highlights increased Henry Hub gas price, 2026 no at $4.31 up from $3.46 in January STEO
Kristen Nelson Petroleum News
U.S. natural gas prices were up sharply in January, the U.S. Energy Information Administration said Feb. 10 in its February Short-Term Energy Outlook. Cold weather in January resulted in an average Henry Hub price of $7.72 per million British thermal units from increased demand while also resulting in reduced production, leading to record storage withdrawals.
"Winter Storm Fern caused significant short-term pressure on natural gas markets, but we expect higher prices in the near term will increase drilling, resulting in higher production later this year and helping to replenish storage," said EIA Administrator Tristan Abbey. "Ultimately, this will result in lower natural gas prices next year than we had forecast. Our updated forecast anticipates Henry Hub prices will average $4.30/MMBtu in 2026 and $4.40/MMBtu in 2027, 5% lower than our January forecast."
The agency said the Henry Hub spot price set a nominal record of $30.72 per million Btu on Jan. 23.
In January EIA's forecast was for Henry Hub spot prices to average $3.46 per million Btu this year and $4.59 per million Btu in 2027. The new forecast is an increase of 24.6% for this year and a decrease of 4.5% for 2027.
EIA said the January natural gas price was up 81% from December with withdrawals by the end of March expected to leave less than 1.3 trillion cubic feet of gas in storage, 8% below the agency's previous forecast.
As demand intensified in the latter half of January and production declined due to temporary well freeze-offs, there was a withdrawal of 360 billion cubic feet for inventory, "the largest storage withdrawal on record," EIA said.
Because of the drawdown, the agency said it raised its spot price forecast for February and March by an average of almost 40% from the January forecast. Price increases are expected to moderate as higher prices drive drilling activity.
Drop in gas production EIA said it estimates a drop of 4 bcf per day, 3%, in Lower 48 natural gas production from December to January because of frigid weather conditions, with the production drop expected to be temporary and almost all of the production back online in February.
Most of the production which was offline was in the Northeast Appalachia region.
Production is expected to ramp up in the second half of the year as new pipeline capacity comes online in the Permian basin and drilling activity is increased in response to higher prices, with U.S. dry natural gas production forecast to grow by 2% this year and by 1% in 2027.
Growth is expected to be slower in the first half of 2026 "as weather-related disruptions and lack of sufficient Permian pipeline takeaway capacity affect production in the Lower 48 states," the agency said.
Once new pipeline capacity comes online in the Permian in the second half of the year, production is expected to ramp up. In 2027 higher gas-oil ratios in the Permian and increased drilling in the Haynesville region driven by higher prices are expected to result in overall production growth.
U.S. dry natural gas production is forecast to be 110 bcf per day this year and more than 111 bcf per day in 2027 -- both forecasts up more than 1 bcf per day from the January forecast, EIA said.
Brent price up EIA said the Brent spot crude oil price averaged $67 per barrel in January, the highest since last September, "as weather-related events disrupted the global crude oil supply and escalating tensions with Iran put upward pressure on prices."
The agency's forecast for Brent is $58 per barrel this year, dropping to $53 per barrel in 2027, both down from the 2025 average of $69 per barrel.
The decline in Brent this year is the expected result of global oil production exceeding global oil demand, EIA said, causing inventories to rise.
Global inventories are expected to continue rising in 2027.
The agency attributed the rise in oil prices to disruptions in U.S. and Kazakhstan crude oil production but said despite near-term price increases and oil supply disruptions, "we forecast that strong growth in global oil production will result in high global oil inventory builds over the forecast, causing crude oil prices to fall."
U.S. disruptions to oil production were cold weather related, with an estimated reduction of 320,000 barrels per day in January, while in Kazakhstan there were power outages at the major Tengiz oil field as well as a drone attack and severe weather at the producer's primary export terminal in Russia, resulting in a reduction of more than 400,000 bpd in January.
EIA said total unplanned disruptions were up in both December and January, for a total of some 3 million bpd, the most since September 2024.
Crude oil demand was up in the northern hemisphere in January because of cold weather at the same time as the disruptions, adding to upward price pressures.
In spite of disruptions, EIA said, "we assess that strong global oil production growth will continue to outpace oil consumption over our forecast, driving our assessment that global inventories will increase," both this year and next. Global oil inventory growth is forecast to average 3.1 million bpd this year compared to 2.7 million bpd last year, before decreasing to 2.7 million bpd in 2027.
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