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Natural Gas Production Growth Outpaces Demand, Pressuring Prices, EIA Says

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The US Energy Information Administration EIA expects Henry Hub natural gas prices to average $3.34 per million British thermal units in Q2 2026 after lowering its outlook on stronger supply growth, it said in its monthly Short-Term Energy Outlook for June on Tuesday.

The report reflects data and analysis completed as of June 4.

The Henry Hub natural gas spot price averaged $2.94/MMBtu in May, up 17 cents from April, while daily prices climbed above $3/MMBtu near month-end, the EIA said.

The agency expects seasonal cooling demand to support natural gas consumption through the third quarter of 2026 as warmer temperatures increase electricity use.

Despite stronger consumption, the EIA lowered its natural gas price outlook after raising production forecasts and increasing storage inventory expectations relative to its January 2026 outlook.

The agency reduced its 2027 Henry Hub price forecast by $1.13/MMBtu from January projections and now expects prices to average $3.34/MMBtu in Q2 2026 and $3.46/MMBtu in 2027.

Higher crude oil prices are encouraging additional oil output and associated natural gas production, contributing to a lower outlook for natural gas prices, according to the EIA.

US marketed natural gas production will increase 3.3%, or about 3.9 billion cubic feet per day, in 2026 and rise a further 2.5% in 2027, the agency said.

The EIA now expects US natural gas production in 2027 to exceed its January forecast by 4.6 Bcf/d, driven primarily by stronger associated gas output from the Permian region.

Production growth will also come from the Haynesville region, where liquefied natural gas export demand and natural gas prices play a larger role, helping keep inventories above the five-year average.

A 3% increase in cooling degree days between June and September will lift electricity generation to 1,620 billion kilowatthours this summer, up 3% from last year, the EIA said.

Renewable energy sources will supply most of the additional power demand, with utility-scale solar generation rising 19% and wind generation increasing 10%.

The EIA also expects hydroelectric generation to increase about 5% and nuclear generation to rise 1%, while coal-fired generation declines 2% from last summer.

Coal production will decrease across all producing regions from the second quarter of 2026 through at least December 2027, with total output falling 2%, or 10 million short tons, to 518 million short tons in 2026.

The agency forecasts coal production will decline by just over 4%, or 22 million short tons, in 2027 to 497 million short tons, with the largest reductions expected in Western producing regions.

Coal consumption in the electric power sector fell 11%, or 13 million short tons, during Q1 2026 and will decline 8% to 386 million short tons this year, while inventories increase 4% in 2026 and 3% in 2027, the EIA said.

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