2025 Natural Gas Forecast: LNG Exports and Domestic Demand Drive Bullish Outlook

Natural Gas Market Recap and 2025 Forecast

In 2024, the U.S. natural gas market was shaped by steady domestic production, expanding LNG export capacity, and ongoing geopolitical factors. As traders position for 2025, the focus remains on supply-demand balances, price levels, and the role of U.S. gas in global markets.

Price Movements and Storage Levels

U.S. natural gas prices spent much of 2024 under pressure due to mild weather and higher-than-average storage. Henry Hub spot prices averaged just over $2.00 per MMBtu in November, down from $2.20 in October. By the start of winter, storage was 6% above the five-year average​​.

Cold weather in late November and early December lifted prices, with Henry Hub forecast to average $3.00 per MMBtu through the winter heating season, ending in March 2025​​. Even with the projected drawdowns, storage is expected to close March 2025 at 1,920 Bcf—2% above the five-year average. Colder-than-normal December forecasts could accelerate withdrawals, but expectations for milder temperatures in Q1 may limit further downside for inventories​​.

Production and LNG Expansion

U.S. dry gas production averaged 103 Bcf/d in Q4 2024, with output expected to hold steady into Q1 2025. Production for the year is forecast to rise by 1%, driven by growth in the Permian, Eagle Ford, and Haynesville regions. Associated gas production in oil-heavy basins and new projects in Haynesville continue to support output​​.

On the export front, U.S. LNG capacity is set to grow in 2025. Exports averaged nearly 12 Bcf/d in 2024 but are expected to increase by 15%, reaching 14 Bcf/d, as Plaquemines LNG and Corpus Christi Stage 3 come online by the end of 2024​​. Both projects secured FERC approvals to proceed, clearing the way for operations to ramp up.

Global LNG Demand and Europe’s Role

European LNG demand remains a strong driver of U.S. exports. In 2024, the EU imported 16.5 million tonnes of Russian LNG—20% of its total LNG imports. This uptick comes despite efforts to reduce reliance on Russian energy, driven by competitive pricing and opportunistic buying​.

The Russia-Ukraine conflict continues to weigh on European gas supply. A key flashpoint is the expiration of the gas transit agreement between the two nations on January 1, 2025. Hungary and other Eastern European countries are negotiating to maintain shipments through Ukraine, but uncertainties remain​.

For U.S. exporters, European demand provides a solid base. As the EU looks to secure gas ahead of winter, U.S. LNG offers a reliable alternative to Russian supply. However, any disruptions to Ukrainian transit routes could tighten European markets, creating ripple effects in global LNG prices.

Domestic Demand and Power Generation

U.S. power generation remains a major source of natural gas consumption. Power demand is forecast to hit record highs of 4,086 billion kWh in 2024 and 4,165 billion kWh in 2025, fueled by data center growth, AI workloads, and rising residential use​.

Natural gas is projected to account for 43% of electricity generation in 2024 before dipping to 40% in 2025 as renewables gain ground. Renewable generation is set to rise to 25% by 2025, reducing coal’s share​.

Gas demand from the power sector is forecast to hit 37 Bcf/d in 2024, exceeding the 2023 peak of 35.5 Bcf/d. Industrial and residential consumption is expected to remain stable, reinforcing natural gas’s position as a key driver of energy reliability​.

Geopolitical Risks and Policy

While production and export growth point to a bullish setup, geopolitical and policy risks could introduce headwinds. The expiration of the Russia-Ukraine gas transit deal poses one immediate concern for 2025. Disruptions could push more European buyers toward U.S. LNG, tightening markets and lifting prices.

Domestically, the Biden administration’s stance on LNG exports remains another factor to watch. In December 2024, the administration released a study urging caution on new export permits, citing potential price impacts and environmental considerations​. While existing projects are moving forward, tighter restrictions on future capacity could limit long-term growth and affect market sentiment.

2025 Forecast

Monthly Natural Gas

Heading into 2025, the U.S. natural gas market reflects a mix of stability and upward price potential. Henry Hub is expected to average just under $3.00 per MMBtu, supported by expanding LNG exports and steady production growth.

Key technical levels show resistance at $4.300, with further upside targets at $4.838 and $5.201. Near-term support sits at $3.647, with stronger downside around $2.588.

Production is likely to keep pace with domestic and export demand, limiting the risk of major shortages. However, traders should keep an eye on the European market, LNG export policies, and potential delays in export infrastructure. Geopolitical risks, including the expiration of the Russia-Ukraine gas transit agreement, could disrupt supply chains and lead to volatility.

Overall, the outlook leans slightly bullish, with stronger exports and resilient domestic consumption providing price support through 2025. The recent 11.45% gain in futures suggests bullish momentum, but price action may stay within a broader range unless fundamentals shift significantly.

More Information in our Economic Calendar.