U.S. Natural Gas Prices Stay Calm Despite Global LNG Crisis

While Europe and Asia are reeling from the highest natural gas prices in three years following the closure of 20% of global LNG flows amid the Middle East war, the United States remains relatively insulated from the biggest price shock since the 2022-2023 energy crisis.

U.S. natural gas futures have remained in the $3.10-$3.40 per million British thermal units (MMBtu) range since the war began and forced Qatar, the world’s second-largest LNG exporter, to shut in production at Ras Laffan, the world’s biggest liquefaction complex. Qatar has also issued force majeure notices to customers as the Strait of Hormuz became inaccessible for tanker traffic, effectively shutting in about 20% of global LNG flows that pass through the world’s most critical oil and LNG chokepoint.

As a result, benchmark gas prices in Europe and spot Asian LNG prices skyrocketed to three-year highs, and Asia started winning the competition for spot supply, attracting most flexible-destination LNG cargoes away from Europe.

Meanwhile, the world’s top LNG exporter, the United States, has not seen major spikes in domestic natural gas prices, as little additional gas can be diverted to LNG exports, considering that export facilities are running at full capacity. Moreover, domestic dry gas production is rising and will continue to rise this year and next, as producers look to maximize the upside, and associated gas output from oil production is going up.

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In fact, the biggest spike in U.S. natural gas prices this year, so far, happened at the end of January during the severe winter storm Fern. At the end of January, the benchmark U.S. natural gas futures at Henry Hub jumped as Arctic cold descended on the eastern United States. Natural gas prices soared above the threshold of $6 per MMBtu, more than doubling in just one week in the strongest rally since the 1990s.

Despite the more interconnected energy markets globally, Henry Hub prices are much more sensitive to domestic supply and demand fundamentals than to global shocks right now, as there isn’t much capacity for increased LNG export that would suck gas supply out of the U.S.

The benchmark U.S. natural gas prices are now down by 50% from the January high and about 25% lower compared to this time last year.

As the winter season comes to an end, U.S. gas stocks were higher than last year at this time for the week ending February 27, and stood within the five-year historical range, per EIA estimates in its latest weekly report.

In the monthly Short-Term Energy Outlook (STEO) this week, the EIA expects U.S. natural gas prices to be relatively unaffected by the Middle East shock to LNG supply.

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The administration also forecasts that the Henry Hub spot price would average about $3.80 per MMBtu in 2026, down by 13% compared to last month’s projections. Prices in the early part of the forecast are lower because of milder-than-forecast temperatures in February that left more natural gas in storage than expected. The Henry Hub spot price would average nearly $3.90/MMBtu in 2027, which is 12% lower than the forecast last month.

“Lower prices in 2027 mostly reflect more associated natural gas production as a result of the recent increase in oil prices and the related increase in production later in the forecast,” the EIA said.

The gas shortage outside America cannot be met with U.S. LNG exports, analysts say.

“For LNG, the answer is straightforward: there is very little scope to increase US exports in the short term. The plants are already running at close to full capacity,” says Kristy Kramer, Wood Mackenzie’s head of LNG strategy and market development.

“Any increase that can be squeezed out from existing facilities is unlikely to be material,” Kramer said.

Even the new capacity set to come online later this year from Golden Pass LNG in Texas and the ramp-up of Cheniere Energy’s Corpus Christi Stage 3 would only be about 20% of what has been lost from the shutdown of QatarEnergy’s Ras Laffan, according to Wood Mackenzie.