US Natural Gas: A Booming Market Faces Crosscurrents of Demand and Price Pressures

The U.S. Energy Information Administration (EIA) has projected that 2025 will mark a historic inflection point for the natural gas market, with both production and demand reaching record levels. This surge, driven by robust LNG exports and domestic consumption, is reshaping the energy landscape—but it also highlights vulnerabilities tied to pricing, geopolitical risks, and the competing imperatives of decarbonization. For investors, the question is whether this boom can sustain itself amid these crosscurrents.

The EIA forecasts U.S. dry natural gas production to climb to 104.9 billion cubic feet per day (Bcf/d) in 2025, surpassing the 2023 record of 103.6 Bcf/d, before edging higher to 106.4 Bcf/d in 2026. This growth is underpinned by expanding LNG exports, which are expected to average 15.2 Bcf/d in 2025—up 18% from 2024—thanks to new terminals like Plaquemines LNG and Corpus Christi Stage 3. These projects, along with Golden Pass’s planned 2026 expansion, are turning the U.S. into a global LNG powerhouse.

Domestic consumption is also rising, driven by colder winters and industrial demand. Residential and commercial gas use is projected to jump 9% in 2025, hitting 23.0 Bcf/d, while higher electricity demand—from data centers, electrification, and transportation—will push total power generation to a record 4.2 trillion kWh by 2026. Yet, this growth comes at a cost: the Henry Hub gas price, a benchmark for U.S. natural gas, is expected to average $4.30/MMBtu in 2025, up from $2.20/MMBtu in 2024, and climb further to $4.60/MMBtu in 2026.

The price surge is straining the gas-to-coal switching dynamic. High gas prices have already led some power plants to revert to coal, undermining decarbonization efforts. Coal’s share of power generation, though declining to 15% by 2026 from 16% in 2025, remains a stubborn counterweight to renewables. Meanwhile, U.S. coal production is projected to hit its lowest level since 1964 in 2025, dropping to 506.4 million tons, as stricter regulations and market forces push utilities toward cleaner alternatives.

Investors must weigh these dynamics carefully. LNG exporters such as Cheniere Energy (LNG) and NextDecade Corp. (FANG) stand to benefit from rising global demand, especially as Asian and European buyers seek stable supplies. However, geopolitical risks—like China’s tariffs on U.S. propane and OPEC’s production policies—could disrupt trade flows and prices.

On the production side, companies like EQT Corp. (EQT) and Devon Energy (DVN) may face pressure to balance output growth with the cost implications of higher prices. While rising gas prices can boost producer revenues, they also risk slowing demand growth in sectors like power generation.

The EIA’s outlook underscores a market in flux. The record output and demand reflect the U.S. gas industry’s resilience, fueled by technological innovation and global demand. Yet the interplay of pricing volatility, coal’s lingering role, and geopolitical uncertainties creates significant risks. For investors, the key is to distinguish between structural trends—such as LNG’s global importance—and cyclical factors like weather or trade policies.

Conclusion: U.S. natural gas is undeniably booming, with 2025 setting new milestones in both production and demand. LNG exports, driven by new terminals and flexible contracts, are a major tailwind, while domestic consumption is propped up by colder winters and industrial growth. However, the path forward is fraught with challenges: rising prices threaten to displace gas in power generation, geopolitical risks could disrupt exports, and the push for decarbonization remains a long-term overhang.

Investors should focus on companies well-positioned to capitalize on export opportunities while hedging against price volatility. The EIA’s projections—$4.60/MMBtu gas prices by 2026 and 16.4 Bcf/d LNG exports—suggest sustained demand, but the market’s health will depend on balancing these gains against the costs. In this era of record highs, the natural gas story is as much about navigating risks as it is about riding the boom.