The U.S. shale industry is witnessing a surge in natural gas production, driven by a significant rise in prices, while oil output remains stable.
Despite WTI Crude prices staying below $70 per barrel, U.S. oil producers have kept production steady, adhering to disciplined output levels. However, the situation for natural gas is different. After a year of curtailed production due to historically low prices, natural gas producers in key shale regions like Appalachia, Marcellus, Haynesville, and Eagle Ford now have strong reasons to ramp up output.
Natural Gas Price Surge
The benchmark U.S. natural gas price at Henry Hub has seen a remarkable increase over the past year. Prices have more than doubled, climbing from $1.83 per million British thermal units (MMBtu) in March 2024 to over $4 per MMBtu this week.
This price rally reflects several changes in the U.S. natural gas market. A mild winter in 2023/2024 was followed by one of the coldest winters in six years, driving up demand. Natural gas inventories, which had been above average at the start of last year, have since fallen below the five-year average. While production remained relatively flat in 2024 due to low prices and production cuts, demand surged, fueled by increased consumption for heating and power generation, as well as record levels of U.S. LNG exports.
At the start of the winter heating season in November 2024, U.S. natural gas inventories were higher than average, marking the highest levels since 2016. However, these stocks were quickly depleted during the harsh winter, leaving inventories well below last year’s levels. As of mid-March 2025, U.S. natural gas stocks were 12% lower than the five-year average and 27% lower than the same time in 2024, according to the latest data from the U.S. Energy Information Administration (EIA).
The rate of withdrawals from storage is 25% higher than the five-year average, further tightening supply.
Higher Prices, Increased Output
The combination of lower inventories and rising demand has led to higher natural gas prices, prompting producers to boost output. Traders are also betting that prices will continue to rise, especially as demand from U.S. LNG plants increases with the ramp-up of new export facilities.
Unlike the crude oil sector, where market sentiment remains cautious, investors are increasingly bullish on U.S. natural gas. With inventories dipping and prices climbing, natural gas producers are preparing for growth in production over the next couple of years.
U.S. Natural Gas Production Set to Rise
As a result of higher prices and tighter supply, producers are ramping up natural gas output. For example, Expand Energy, the largest independent U.S. natural gas producer, plans to increase its daily production from 6.41 billion cubic feet per day (Bcfe/d) in the fourth quarter of 2024 to approximately 7.1 Bcfe/d in 2025. The company is also aiming for a production level of 7.2 Bcfe/d by the end of 2025, with plans to further grow capacity in 2026.
U.S. Energy Secretary Chris Wright has also predicted significant growth in natural gas production over the next few years, outpacing oil production. “Natural gas production will grow dramatically in the next two or three years,” Wright told Bloomberg. Oil production, on the other hand, is expected to remain relatively flat in the short term.
According to the EIA’s March 2025 Short-Term Energy Outlook, U.S. dry natural gas production is set to rise by 2% in both 2025 and 2026, following a flat production year in 2024. The Henry Hub price is forecasted to average $4.20/MMBtu in 2025, a 37% increase from previous projections, with further gains expected in 2026.
Pipeline Capacity Expansion
The expansion of pipeline infrastructure is also helping to meet growing demand. The Trump Administration has pledged to ease the build-out of pipeline projects, which would boost the ability to transport natural gas from production areas to demand centers.
In 2024, pipeline takeaway capacity grew by 6.5 billion cubic feet per day (Bcf/d) due to five new projects across the Appalachia, Haynesville, Permian, and Eagle Ford regions. This increased capacity will help deliver natural gas to demand centers in the U.S. Mid-Atlantic and Gulf Coast. Additionally, another five projects in Texas and Louisiana expanded capacity to U.S. LNG export terminals by 8.5 Bcf/d.
Overall, smaller interstate and intrastate pipeline projects added an additional 3.0 Bcf/d of capacity, bringing the total new pipeline capacity in 2024 to 17.8 Bcf/d.
Conclusion
The U.S. natural gas industry is positioned for significant growth as rising prices, increased demand, and expanded infrastructure create an environment ripe for higher production. As natural gas inventories remain tight, producers are gearing up for a busy few years, and market expectations point to sustained price strength as global LNG demand continues to rise.
Related Topics:
- Nat-Gas Prices Drop Slightly Due to Warmer US Temperatures
- Turkey Increases Gas Production as Europe’s Output is Expected to Drop by 2050
- Woodside Secures 15-Year LNG Supply Agreement with Chinese Gas Company