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AI Power Demand, Tighter Supply To Push US Gas Prices Higher, Wood Mackenzie Says

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The era of ultra-cheap US natural gas is drawing to a close, Wood Mackenzie strategists said in a note on Thursday, citing surging demand from artificial intelligence-driven data centers and LNG exports that are colliding with constrained supply growth.

Wood Mackenzie analysts said in a report that US benchmark Henry Hub natural gas prices are forecast to approach $5 per million British thermal units in real terms by 2035, marking a significant departure from the $2-$4/mmbtu range that prevailed for much of the past decade.

The analysts said the shift signals a fundamental change in the forces shaping the US gas market, with demand growth outweighing the supply-side advantages that kept prices subdued for years.

"The conditions that kept Henry Hub between $2 and $4/mmbtu for the best part of a decade are no longer all operating at full force," said Kristy Kramer, head of LNG strategy and market development at Wood Mackenzie.

"Rapid play development, near-zero-cost associated gas, and year-on-year productivity gains drove that era of low, stable prices. Those tailwinds have largely run their course," said Kramer.

The forecast comes as the US power sector emerges as the dominant source of new gas demand, fueled by the rapid expansion of energy-intensive data centers supporting artificial intelligence applications.

Wood Mackenzie projects that power sector demand alone will require an additional 17 billion cubic feet per day of natural gas by the mid-2030s, representing about a 50% increase from 2025 levels.

Similarly, the US LNG industry continues to expand significantly. Wood Mackenzie said that following a record year for final investment decisions on export projects in 2025, additional LNG facilities are expected to receive approval in 2026.

The US is projected to account for more than one-third of global LNG supply in the early 2030s, reinforcing its position as the world's largest exporter while raising questions among buyers about the risks of supply concentration.

On the supply side, the industry's ability to deliver low-cost production growth is beginning to diminish.

Wood Mackenzie said that producers have already developed much of the highest-quality acreage across major shale basins, including the Marcellus, Permian, and Haynesville formations, leaving increasingly complex and less productive resources to be exploited.

Technology improvements that once drove significant productivity gains are also delivering diminishing returns, while the contribution of associated gas, produced as a byproduct of oil drilling, is expected to decline sharply.

"Associated gas accounted for roughly half of all US gas supply growth over the past decade at near-zero marginal cost," said Dulles Wang, director of Americas gas and LNG research at Wood Mackenzie. "Over the next ten years, that share is expected to fall below 20%."

The changing dynamics mark a significant evolution for Henry Hub, the benchmark pricing point in southern Louisiana that has long underpinned US gas and LNG contracts.

Though Henry Hub will remain influenced by regional supply, demand, and infrastructure constraints, Wood Mackenzie said that the assumptions underpinning a decade of low and stable US gas prices can no longer be taken for granted.

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