EIA warns US gas storage nears limits as production outpaces demand
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US natural gas output is set to break records, but the market’s ability to absorb the surge is under strain. The Energy Information Administration’s July 2025 Short-Term Energy Outlook projects dry gas production will average 105.4 billion cubic feet per day for the year, a notable increase over 2024. This growth comes from sustained shale activity, particularly in the Permian and Appalachian basins, where improved drilling efficiency continues to drive output.
On the demand side, growth remains muted. Domestic consumption holds steady at around 88.9 Bcf/d, reflecting modest residential use and limited industrial uptake. The resulting gap is being absorbed through injections into underground storage, but capacity is tightening fast. Storage inventories are now 20 percent above the five-year average for mid-July. If injection rates continue, the system could hit its effective limit before the winter heating season begins.
Storage capacity could be tested before winter heating season begins
By mid-July, working gas in storage reached 3,220 Bcf. With total capacity around 4,000 Bcf across the Lower 48, analysts say the system could max out by early October.
Underground storage is typically filled from April to October in anticipation of winter demand. This year, injections are running ahead of schedule. Operators may need to scale back or reroute gas if volumes approach full capacity.
Although theoretical storage headroom exists beyond 4,000 Bcf, operating safely and economically past that point is difficult. If no viable destination for surplus gas is found, producers may be forced to cut output, with possible implications for earnings and regional job markets.
Flat demand and limited infrastructure amplify the oversupply risk
Pipeline constraints add to the pressure. In regions like the Marcellus and Permian, takeaway infrastructure has not kept pace with production. With few major expansions scheduled for 2025, there are limited ways to reroute gas.
LNG exports are helping but not solving the issue. The US is forecast to export 12.6 Bcf/d this year. Yet with overseas demand leveling off, export volumes may not grow quickly enough to absorb the domestic surplus. This imbalance raises the prospect of stranded gas, even as producers remain focused on efficiency and output.
Price outlook remains bearish despite global energy uncertainty
The oversupply is driving down domestic prices. The EIA now expects 2025 Henry Hub spot prices to average $2.70 per million British thermal units, revised from $2.88.
Despite global LNG volatility and geopolitical risks, the US gas market remains somewhat insulated due to limited demand elasticity and an internal supply loop. With high inventory levels and stable consumption, short-term prices offer little incentive to throttle production.
Producers face shrinking margins and potential shutdowns if the supply glut continues. Midstream operators must prepare for elevated volumes with little room to maneuver.
Policy responses may include easing infrastructure permitting or adjusting LNG export policies. While natural gas remains important to long-term energy planning, the short-term dynamic could force difficult decisions.
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