The US Energy Information Administration July 8 lowered its spot natural gas price forecast for the remainder of 2025, citing above-average storage injections starting in late April alongside production increases in the second quarter.

The agency, in its July Short-Term Energy Outlook, reduced its forecast for Q3 Henry Hub natural gas spot prices by 64 cents to $3.37/MMBtu, and cut its Q4 forecast by 68 cents from the previous month’s estimates to $3.99/MMBtu.

The agency estimated that Henry Hub natural gas prices will average $3.67/MMBtu for full-year 2025 and $4.41/MMBtu in 2026, down from the previous month’s estimates of $4.02/MMBtu in 2025 and $4.88/MMBtu in 2026.

“Compared with our June forecast, we expect more natural gas in storage in the coming months because of slightly more natural gas production and less power-sector demand,” the agency said.

From late April to early June, the EIA said the US saw seven consecutive weeks of net injections exceeding 100 Bcf, leading to inventories that were 7% above the five-year average at the end of June.

The recovery in storage volumes follows a withdrawal season that concluded in March at 4% below the five-year average.

The agency now expects inventories will be at 3.9 Tcf at the end of October, 5% more than its June predictions and 3% above the five-year average.

Production and LNG demand will be “two key drivers” of gas prices in the months ahead, according to the agency. One factor to consider is the forecasted above-normal hurricane activity that has the potential to disrupt Gulf Coast LNG exports, the agency noted.

Production to hover around 116 Bcf/d
The EIA raised by 600 MMcf/d to 116.3 Bcf/d its natural gas marketed production estimate for the US in the third quarter of 2025, while also lowering its natural gas consumption estimates by 600 MMcf/d to 84.4 Bcf/d for Q3.

Total marketed natural gas production in Q2 averaged 116.8 Bcf/d, up 4.7 Bcf/d from a year earlier, as higher natural gas prices supported the production levels, according to the outlook.

“We expect production to remain near this level through 2026, averaging around 116 Bcf/d in both 2025 and 2026,” the outlook said. “This increase is driven mainly by the Permian region, which we expect to produce 27.0 Bcf/d in 2025, or 6% more than in 2024, along with increases in the Appalachia and Haynesville regions.”

Production levels are expected to stay flat in 2026, however, the EIA said, as growth in the Permian and Appalachian basins offsets declines elsewhere.

Power generation
The EIA forecast that the surge in solar generation growth seen in the past few years will continue this summer, pushing solar closer toward surpassing wind power in the season.

The agency predicts that from June to September the electric power sector will produce 124 billion kWh of solar generation, 34% more than the same period a year ago. Solar would be the second-largest source of power generation this summer behind wind among renewable resources, the EIA said. The EIA also forecast that solar generation will exceed hydropower output by about 50% this summer, one year after solar exceeded hydropower for the first time in this season, by 15%.

“By summer 2026, we forecast solar generation will grow by another 19% to 147 billion kWh, which means solar would surpass wind to become the leading source of renewables generation during the summer,” the EIA said.

The solar generation growth has displaced some gas generation in certain areas. The EIA expects higher generation from renewables and increased fuel costs will cause gas-fired generation in the US to drop 4% in 2025 ahead of a forecast 2% increase in 2026.

Power prices
Though the EIA reduced its Q3 forecast for Henry Hub spot prices, the agency still expects them to be higher than last summer and drive US wholesale electricity prices 12% higher than they were a year ago.

The composite wholesale power price for the 11 price hubs reported in the July Short-Term Energy Outlook averages a little over $45/MWh for June to September, compared to nearly $41/MWh for last summer.

The PJM Interconnection, New York Independent System Operator, and ISO-New England markets are forecast to have the highest wholesale power prices this summer, the EIA said. PJM is forecast to have the highest wholesale power prices at an average of $57/MWh, which is $10/MWh more than last summer. Prices in NYISO and ISO-NE are expected to average $54/MWh and $49/MWh, compared with $42/MWh and $46/MWh, respectively, in the summer of 2024.
Notably, these three regions and others in the eastern US experienced a significant heat wave in late June that sent wholesale power prices into triple-digits at some hubs.

“Although we expect temperatures for the rest of the summer to be slightly lower on average compared with last summer, any additional heat waves in the remaining summer months could continue to cause wholesale power prices to spike,” the EIA said.

The EIA expects the summer’s lowest wholesale power prices will be seen in the California Independent System Operator market, with its SP15 zone poised to average around $31/MWh, compared with about $38/MWh last summer. CAISO’s SP15 is one of just three price hubs forecast to experience lower average wholesale prices this summer, joining the Northwest’s Mid-Columbia index (dropping to $48/MWh from $54/MWh) and the Southwest’s Palo Verde index (falling to $40/MWh from $44/MWh).
Source: Platts