The U.S. natural gas sector historically navigates through predictable phases of oversupply and scarcity, which in turn drive price fluctuations. Analysis of market data from 2007 to 2025 reveals a consistent pattern in how market conditions and storage levels reflect these cyclical shifts. Forecasts indicate that by 2027–2028, the market is poised to transition from its current surplus to a structural deficit, initiating a new period of escalating natural gas prices across the nation.
Natural gas, like many commodities, is inherently cyclical. Its prices do not move in a linear fashion but instead exhibit multi-year oscillations, influenced by supply and demand dynamics, as well as investment in production and infrastructure. High prices typically stimulate investment and production, leading to eventual market saturation and a subsequent price decline. Conversely, low prices discourage investment, reduce output, and ultimately lead to shortages, pushing prices upward again. This self-correcting mechanism is a hallmark of commodity markets.
The Cyclical Nature of US Natural Gas Prices: Past and Future Trends
The US natural gas market, particularly at the Henry Hub, vividly illustrates this cyclical behavior. Several key factors contribute to its pronounced cycles: the significant capital investment required for production and infrastructure, which delays price response by about 18 months; seasonal demand fluctuations due to heating in winter and cooling in summer; and the complexities of natural gas storage, where excess quickly depresses spot prices. Furthermore, new production capacity typically takes up to two years to come online after prices rise, reinforcing these cycles. These elements collectively make the market susceptible to periodic shifts between surplus and deficit, with each phase lasting 3-5 years.
Over the past two decades, the US natural gas market has experienced several distinct cycles. From 2008–2012, a "shale revolution" led to a significant surplus and a sharp price drop below $2/MMBtu. This was followed by a deficit in 2013–2014, with prices temporarily surging above $6/MMBtu due to cold weather. Another surplus occurred in 2015–2016, pushing prices down to $1.7/MMBtu, until LNG exports and declining drilling restored balance by 2018. The market saw an unprecedented surplus in 2020 due to a warm winter, the pandemic, and reduced industrial demand, causing prices to collapse to $1.5/MMBtu. However, subsequent drilling cutbacks and global economic recovery led to a tight balance and prices exceeding $8–9/MMBtu in 2021–2022. Currently, from 2023–2025, the market is again in a significant surplus, characterized by high production, ample reserves, and a wide contango in the futures curve, but fundamental forces are already setting the stage for a new price growth cycle by 2027–2028.
Anticipating the 2028 Shortage: Key Drivers and Market Evolution
Despite the current abundance, historical trends strongly suggest that periods of surplus inevitably pave the way for future price increases. Several factors are expected to drive the US natural gas market towards equilibrium by 2026 and into a nascent shortage by 2027–2028. Firstly, production growth is slowing as companies scale back drilling activity; the number of gas drilling rigs in 2025 has decreased by about 15% compared to 2023. Given the 1.5- to 2-year lag observed in past cycles, this reduction in drilling is likely to lead to a gradual decline in overall production by 2027. This slowing supply will be met with increasing demand from two primary sources.
Secondly, the expansion of US LNG export capacity is a significant pressure point. Several large LNG plants are slated to open in 2026–2027, boosting export capacity by 6–7 billion cubic feet per day, or roughly 6–7% of total US production. By 2028, total gas exports could account for 20% of national production, with most going to Europe and Asia where prices are substantially higher. Thirdly, domestic gas consumption in the US is steadily rising, fueled by the energy transition as gas increasingly replaces coal in electricity generation and finds growing application in industrial sectors such as chemicals and metallurgy. This internal demand adds an annual 1–1.5 billion cubic feet per day. Combining these trends, natural gas supply is expected to decrease while both export and domestic demand climb, leading to a reduction in storage reserves and eventually a persistent deficit by 2027–2028, with prices likely stabilizing in the $4–5/MMBtu range, potentially spiking to $7–8 during cold winter months.