Nat GAs short term and longer term Meanwhile, natural-gas supply growth in the U.S. is expected to be somewhat constrained. Oil and gas producers are held back both by capital—investors are favoring companies with spending discipline—and a lack of new pipeline capacity, according to Matthew Palmer, senior director of global gas at S&P Global Commodity Insights. In an email, he noted that growth in the Marcellus and Utica Basins in the eastern U.S. has been capped because no significant long-haul pipelines to downstream markets have entered service since 2019. U.S. natural-gas prices also are set to become more linked to international-demand dynamics as liquefied-natural-gas export capacity grows: U.S. LNG export capacity is set to increase by an additional 40% by 2025.
What could worsen fluctuations even further are extreme weather events, which have become more common since the 1970s. That not only accentuates the highs and lows of natural-gas demand but also can affect supply. Colder-than-expected winter days have already caused more freeze-offs in natural-gas supply in recent years, notes Mr. Rubin. In 2021, a cold blast hitting Texas and neighboring states resulted in the largest monthly decline in U.S. natural-gas production ever and a 70-fold increase in local prices.
There could be a slight reprieve in the short run. The EIA expects U.S. natural-gas production to increase 2% in 2023, while this would be the first year without new LNG export-capacity additions coming online since 2016, when the U.S. began to export LNG from the Lower 48 states. Natural-gas inventory looks healthy, too, with storage exceeding the trailing-five-year average at the moment.