In our January Short-Term Energy Outlook (STEO), we forecast the U.S. benchmark Henry Hub natural gas spot price to increase in 2025 to average $3.10 per million British thermal units (MMBtu) and in 2026 to average $4.00/MMBtu from the record low set in 2024.
Natural gas prices
In our forecast, the annual U.S. benchmark Henry Hub spot price averages $3.10 per million British thermal units (MMBtu) in 2025 and rises to almost $4.00/MMBtu in 2026.
ANZ Research forecast the LNG spot price to drop to an average of $32/MMBtu in 2023 and $23.5/MMBtu in 2024, compared with an estimated $36.8/MMBtu in 2022. The World Bank forecast US natural gas prices could average $6 in 2024. It expected European gas prices to trade at $28 in 2024, dropping from $40 in 2022.
One forecast is for natural gas demand to peak in 2035. The concept of peak gas follows from Hubbert peak theory, which is most commonly associated with peak oil. Hubbert saw gas, coal and oil as natural resources, each of which would peak in production and eventually run out for a region, a country, or the world.
The anticipated decline in residential natural gas prices marks a significant moment for natural gas pricing for consumers. The EIA forecast shows inflation-adjusted natural gas prices drop to $12.75 per Mcf in 2024 and $12.00 per Mcf in 2025, a decline of 17% and 22%, respectively, from 2023 prices.
We expect increases in the Henry Hub natural gas price in 2025 and 2026 as demand for natural gas grows faster than supply, driven mainly by more demand from U.S. liquefied natural gas (LNG) export facilities, reducing the natural gas in storage compared with the last two years.
October and November are typically the most volatile months for natural gas prices.
US Natural Gas Price Outlook
The US Energy Information Administration predicts that the monthly average Henry Hub price will reach $3.71/MMBtu in December 2023, with prices averaging $2.91/MMBtu for the year. This decline is attributed to factors such as steady production, demand, and competition from liquid fuels.
High natural gas production, low natural gas consumption, and higher natural gas inventories than the previous five-year (2018–22) average contributed to prices declining for much of 2023 and the first two months of 2024.
Natural gas is almost always cheaper than electricity. It's hard to pinpoint just how much cheaper, since both electric and gas prices can be volatile. But in general, the average cost of natural gas can be as much as two or three times less expensive than electricity.
In 2024, heating oil prices will likely fall, staying on trend with the falling crude oil prices since 2022. Other heating alternatives are growing in demand, lowering the price of heating oil.
Natural gas is expected to trade at 3.17 USD/MMBtu by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 3.56 in 12 months time.
EIA has predicted that the price of natural gas in the U.S. will average $3 for all of 2025, which would be a roughly 36 percent increase from 2024's level.
Assuming the same annual rate of U.S. dry natural gas production in 2021 of about 34.52 Tcf, the United States has enough dry natural gas to last about 86 years.
In the July release of its Short-Term Energy Outlook (STEO), published Tuesday, the U.S. Energy Information Administration (EIA) projected a Henry Hub natural gas spot price average of $2.90/MMBtu for the final six months of 2024, up 80.0 cents from the first half of the year.
Natural gas, propane and heating oil cost differences
Natural gas and propane users are also expected to be hit with bigger bills this winter. Heating costs for natural gas are up just over 3%, for an average cost of $634 for the winter period, compared with $615 for 2023-2024.
Generally, propane is more expensive than natural gas on a per-unit basis because its cost is measured per gallon, while natural gas is valued per cubic foot. Hence, natural gas is cheaper per unit of energy than propane.
In line with demand projections, global natural gas supply, which increased by an estimated 1.6 percent in 2024, is expected to grow by over 2.3 percent in both 2025 and 2026. The growth in 2025 is anticipated to come from diverse regions, including Asia Pacific, Eurasia, Middle East and North America.
Though prices can fluctuate depending on supply/demand fundamentals, natural gas prices are often at their lowest during the fall and spring seasons.
We estimate U.S. average gasoline prices in 2025 will decrease by 11 cents per gallon (gal), or about 3%, compared with 2024. In 2026, we forecast a further decrease of about 18 cents/gal, or an additional 6%.
The agency expects that the cost of natural gas will “average $3.37 per million British thermal units in 2025, which is up 24% from last year's average but is about the same price as in 2023.”
Natural gas is less expensive, cleaner and more efficient than coal. In addition to burning cleaner than coal, natural gas is cheap (only renewable energy from wind and solar are less expensive).
"If LCFS credit prices reach their maximum allowed levels, as has occurred in the past, then retail gasoline price impacts could be $0.65 per gallon in the near term, $0.85 per gallon by 2030, and nearly $1.50 per gallon by 2035."