Bank of America has adjusted its outlook for U.S. natural gas prices in the second half of 2026, raising the Henry Hub forecast to $3.8 per million British thermal units (MMBtu) from a previous $3.6, driven by what it describes as tightening supply balances and a meaningful risk that inventories will be under 3.8 trillion cubic feet as winter approaches.
The bank's note traces recent price behavior: natural gas averaged higher year-over-year between January 2025 and January 2026, but a spell of mild temperatures from late February through April dampened domestic prices. Since February, year-over-year averages have been lower, even as the underlying balances have moved to levels not seen since 2024. Prices have since recovered from the lows seen in April.
Bank of America acknowledges that production continues to expand, but says that growth has been offset by rising demand from liquefied natural gas (LNG) facilities and the power sector, together with reduced imports from Canada. In that context, gas-fired power plants have taken a larger-than-normal share of generation previously supplied by coal following the April price trough.
At the same time, renewable generation is expanding: solar capacity is setting new records and wind achieved its strongest June performance on record, according to the bank's commentary. These trends are noted alongside stronger-than-expected gas demand from other sources.
LNG-related demand is a focal point. Bank of America reports that LNG feedgas demand averaged roughly 3.1 billion cubic feet per day higher year-over-year in the second quarter of 2026. The bank expects U.S. LNG feedgas demand to increase by nearly 4 billion cubic feet per day over the next 18 months as additional export facilities commence operations.
Cross-border flows are also cited as an influence. In Canada, demand from LNG Canada trains 1 and 2 has outpaced production growth in Western Canada since last summer, prompting Canada to curtail pipeline gas exports to the United States. Additionally, Costa Azul LNG on Mexico's west coast has recently begun taking feedgas.
On the production side, the bank notes that overall U.S. natural gas output remains below the December 2025 peak despite increased activity in basins such as Haynesville and Appalachia. In the Permian basin, relatively strong Waha basis levels suggest there is less stranded gas than had been anticipated.
Bank of America left its Henry Hub forecast for 2027 unchanged at $4/MMBtu.
Context and implications
- The revision to the 2H 2026 forecast reflects the balance between growing domestic production and rising demand from LNG exports and power generation.
- Reduced pipeline flows from Canada and the ramp-up of new LNG capacity are central to the bank's view of tighter market conditions.
- Renewable generation gains are occurring alongside stronger gas demand in other sectors, creating a nuanced supply-demand picture.