U.S. natural gas prices spent much of 2024 under pressure due to mild weather and higher-than-average storage. Henry Hub spot prices averaged just over $2.00 per MMBtu in November, down from $2.20 in October. By the start of winter, storage was 6% above the five-year average.
Cold weather in late November and early December lifted prices, with Henry Hub forecast to average $3.00 per MMBtu through the winter heating season, ending in March 2025. Even with the projected drawdowns, storage is expected to close March 2025 at 1,920 Bcf -- 2% above the five-year average. Colder-than-normal December forecasts could accelerate withdrawals, but expectations for milder temperatures in Q1 may limit further downside for inventories.
U.S. dry gas production averaged 103 Bcf/d in Q4 2024, with output expected to hold steady into Q1 2025. Production for the year is forecast to rise by 1%, driven by growth in the Permian, Eagle Ford, and Haynesville regions. Associated gas production in oil-heavy basins and new projects in Haynesville continue to support output.
On the export front, U.S. LNG capacity is set to grow in 2025. Exports averaged nearly 12 Bcf/d in 2024 but are expected to increase by 15%, reaching 14 Bcf/d, as Plaquemines LNG and Corpus Christi Stage 3 come online by the end of 2024. Both projects secured FERC approvals to proceed, clearing the way for operations to ramp up.
European LNG demand remains a strong driver of U.S. exports. In 2024, the EU imported 16.5 million tonnes of Russian LNG -- 20% of its total LNG imports. This uptick comes despite efforts to reduce reliance on Russian energy, driven by competitive pricing and opportunistic buying.
The Russia-Ukraine conflict continues to weigh on European gas supply. A key flashpoint is the expiration of the gas transit agreement between the two nations on January 1, 2025. Hungary and other Eastern European countries are negotiating to maintain shipments through Ukraine, but uncertainties remain.
For U.S. exporters, European demand provides a solid base. As the EU looks to secure gas ahead of winter, U.S. LNG offers a reliable alternative to Russian supply. However, any disruptions to Ukrainian transit routes could tighten European markets, creating ripple effects in global LNG prices.