Health of forward gas curve hinges on supply response, US producers say

April 01, 2025  spglobal.com  By Jeremy Beaman

US-based natural gas producers are taking a careful approach to increasing output in 2025, seeing the endurance of a constructive forward price curve as largely in their hands as demand growth materializes.

Over the last several months, cold winter conditions and the startup of a pair of LNG projects have boosted gas demand, lifted prices and given operators hope that 2025 will provide stronger returns than 2024 did. At the same time, operators have illustrated that they do not want to go too far too fast in adding supply and risk eroding the upside they are now realizing.

First-quarter Henry Hub cash prices averaged $4.16/MMBtu, 70% higher than the fourth-quarter 2024 average of $2.45/MMBtu, according to data from Platts, part of S&P Global Commodity Insights. In the forward market, Platts last assessed the balance-of-year Henry Hub strip at $4.50/MMBtu, with winter 2025-2026 including prices above $5/MMBtu.

In its recent annual report to investors, producer Coterra Energy said global gas fundamentals are positive, with some notable downside risks, such as China sustaining its tariffs on US LNG. Producers' strategies would determine the longevity of the cycle, the company said.

"Depending upon supply response, increased demand for natural gas should support robust natural gas pricing for some time to come," Coterra said.

In 2024, Coterra cut all drilling and completion activity in the Marcellus Shale due to uneconomic gas pricing. The company plans in April 2025 to restart gas-directed activity in the basin and to operate one drilling rig and half a completion crew there on average throughout the year, while its total gas production guidance for 2025 is roughly flat year over year.

Other market participants such as EQT, Aethon Energy and CNX Resources say they do not yet intend to contribute supply growth in the year ahead, wishing to avoid a reprise of oversupply conditions that drove benchmark gas prices below $2/MMBtu in early 2024.

"It's going to be demand first and then the supply," EQT CEO Toby Rice told Platts in a recent interview.

Expand Energy, the US' largest producer by volume, has been adding supply and sketched out a path to begin building incremental productive capacity to utilize in 2026, but will not commit the capital yet, CEO Nick Dell'Osso said in February.

"Since we won't pull the trigger on this incremental capacity until midyear, we have time to watch the market, and we'll have the flexibility to adjust as necessary," Dell'Osso said.

Supply and demand

In recent months, Lower 48 gas production has climbed back up to all-time highs as producers continued returning previously curtailed volumes or otherwise increased supply in response to the seasonal boost in demand and prices.

In March, production averaged 105.7 Bcf/d, and output has approached 107 Bcf/d on several days year to date, according to Commodity Insights data.

Morgan Stanley analysts in a March 26 note to clients forecast total 2025 supply growth of 3.5 Bcf/d, but said demand is likely to rise more quickly. The analysts expect year-on-year gas demand growth of 6.3 Bcf/d.

So far, higher demand has begun to materialize this year owed largely to high demand for gas-fired heating and to the startups of Venture Global's Plaquemines LNG export facility, as well as Cheniere Energy's midscale expansion of Corpus Christi. First-quarter LNG demand was 15.6 Bcf/d, compared with 2024's full-year average around 13.2, Commodity Insights data showed.

Total gas demand was nearly 128 Bcf/d on average in the first quarter of 2025, up more than 6 Bcf/d year over year. Commodity Insights analysts forecast total Lower 48 demand for the full year will approach 113 Bcf/d, up from 107.8 Bcf/d in 2024.