The American natural gas market entered 2024 with two facts that look contradictory. Prices had just finished their weakest year since mid-2020, with Henry Hub averaging $2.57 per million British thermal units in 2023, about 62% below the 2022 average. Then, in the middle of January, the Lower 48 consumed more gas in a single day than ever before. On January 16, demand reached an estimated 141.5 billion cubic feet, beating the previous record set during the December 2022 storm.
The system handled it. Prices rose during the cold, but there was no repeat of the scarcity that turned Winter Storm Uri into a national story in 2021. That outcome is a genuine strength of the US gas system, and it is worth explaining. It is also worth being careful about what it does and does not prove for the rest of 2024 and for 2025.
Why 2023 was so cheap
The Energy Information Administration attributes the price collapse of 2023 mainly to supply. Dry gas production averaged a record of about 104 billion cubic feet per day in 2023, 4% above 2022, with growth led by the Permian. Demand did not keep up. A warm January and February, the core of the heating season, produced the lowest residential and commercial consumption for those months in seven years. Temperatures were mild in the Midwest and Northeast, where between half and 70% of households heat with gas.
Total demand still grew about 3% over the year, but the growth came from exports and from power generation, not from heating. LNG exports rose 12% and pipeline exports by 9%. That pattern matters. It means the US market is increasingly balanced by flows that respond to global prices and to the availability of liquefaction capacity, rather than by domestic weather alone.
How the January record was met
The cold snap of mid-January was severe and broad. Consumption in the Lower 48 averaged above 130 billion cubic feet per day from January 14 to 21, as arctic air moved from the Pacific Northwest into Texas and across the Northeast and mid-Atlantic. Heating demand and gas-fired power generation both surged.
Supply fell at the same time. Freeze-offs, which happen when water and liquids in the raw gas stream freeze at the wellhead or in gathering lines, cut into production, as did other weather-related problems. The gap was covered by storage. Net withdrawals in the week to January 19 totaled 326 billion cubic feet, the third-largest weekly draw on record.
That is the central point. The US entered winter with ample inventories, built up over a year of weak demand and strong production. When the cold came, the stored gas was there. Storage, not production flexibility, did the heavy lifting.
The forecast assumes that buffer keeps working
The EIA's January outlook expects Henry Hub to average under $3.00 in both 2024 and 2025, rising from 2023 but staying low by historical standards. Its reasoning is that production stays roughly flat but still edges to new records, with dry gas output rising by 1.5 billion cubic feet per day in 2024 to about 105 Bcf/d. Demand rises faster, driven mostly by LNG exports, which the agency expects to grow by 4% in 2024 and 17% in 2025 as new liquefaction capacity starts up.
We read this as a forecast with a clear sequence. In 2024, the market works down its storage surplus while export growth is modest. In 2025, new export terminals begin to pull meaningfully more gas out of the domestic market. Prices drift up as the surplus narrows.
The risk is in the timing. LNG export projects are large and their start-up dates often slip, but when they come on, they take gas steadily, at close to full capacity, every day. A domestic market that was cushioned by surplus storage in early 2024 could look much tighter in winter 2025 if a cold January coincides with several new export trains ramping up at once.
Low prices change producer behavior
There is another dynamic the headline price forecast does not fully capture. Prices below $3 squeeze dry gas producers, especially in Appalachia and the Haynesville, where gas is the main revenue stream. When prices are weak for long enough, those producers cut drilling and defer completions. Associated gas from the Permian, by contrast, is produced as a byproduct of oil drilling and keeps flowing regardless of gas prices, subject only to pipeline capacity.
That means the composition of US supply is shifting toward gas whose output depends on oil economics. In a cold snap, that matters less than storage. Over a year, it means US gas supply is increasingly tied to decisions made by oil companies responding to crude prices, OPEC+ policy and capital discipline.
The power sector is now the swing consumer
The January record was not just a heating event. Gas-fired generation is now the largest single source of US electricity, and cold weather drives both heating load and electric load at the same time. Every winter peak is now a joint gas and power event. When gas supply is constrained, power supply is constrained, and grid operators have spent the past three years designing winter readiness standards and fuel assurance requirements around that fact.
The good result in January 2024 should not be read as proof that the coordination problem is solved. It shows that a system with full storage and a moderate production loss can meet record demand. It does not show how the system behaves when storage starts the winter below average or when the freeze-offs are deeper and last longer.
What we would watch
For the rest of 2024, three numbers matter more than the monthly Henry Hub average.
The first is end-of-March storage. A large surplus entering the injection season keeps prices low through the summer and gives the market a cushion for next winter. A small one does not.
The second is the start-up schedule for new LNG capacity. The 17% export growth expected for 2025 depends on terminals that are still under construction.
The third is the gas-directed rig count. If low prices cause a sharp pullback in Haynesville drilling, production in 2025 could disappoint just as export demand rises.
January showed that the system is more resilient than it was in 2021. Cheap gas is a strong position to be in. It is not a guarantee, and the margin it provides is likely to narrow as the export build-out arrives.