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Volatility Laces 2023 Natural Gas Price Outlook Amid Robust Production, Demand Uncertainty
U.S. natural gas prices are off to a rocky start in 2023, and analysts are braced for a choppy ride ahead amid expectations for strong production levels, infrastructure constraints and forecasts for relatively mild weather during the heart of winter.

Limits on American exporters’ collective ability to meet global needs add another layer of uncertainty – given both the protracted Freeport LNG outage and a dearth of new liquefied natural gas facilities this year.
“It’s looking really volatile here to start the year, obviously,” Marex North America LLC’s Steve Blair, senior account executive, told NGI. “We have a lot of factors at play – production, LNG – but ultimately weather will rule, as it almost always does.
“It’s early in the winter. If we get more Arctic blasts, the direction of prices could change quickly,” Blair continued. “If we don’t, and production holds up, we could see new tests to the downside.”
To be sure, robust early-winter heating demand across the Lower 48 intersected with intensifying calls for American LNG late in 2022 from both Asia and Europe. Harsh weather in the Rocky Mountains, North Dakota and Midcontinent caused wellhead freeze-offs and temporarily dropped production into the low 90s Bcf/d in December, bolstering prices.
Natural gas futures held comfortably above $5.000/MMBtu late last year and NGI’s Spot Gas National Avg. surged to nearly $20 – boosted in part by widespread freezing weather in typically mild winter climates such as California. By the first week of the new year, however, temperatures warmed over large swaths of the country – with more expected through most of January – and production rebounded to around 101 Bcf/d, near record levels.
As the first week of January trading culminated, futures had flopped well below the $4 handle – and far from the highs last summer near $10 — while cash prices fell to near $5. The exceptional price volatility could define trading in the months ahead, at least until the extent of summer heat becomes known.
February fixed prices tumbled an average of $1.070 across the country, while March dropped 46.0 cents on average, according to NGI’s Forward Look. Smaller losses were posted for the summer (April-October) and winter 2023-2024 (November-March) strips.
Production Powers Up
While characteristically uneven in the winter because of freeze-offs, U.S. natural gas production often topped 100 Bcf/d late last year – hitting record levels above 102 Bcf/d at points. Output averaged close to the century mark for the fourth quarter, according to the Energy information Administration. Production again exceeded the 100 Bcf/d threshold early in 2023.
Output climbed with robust demand throughout 2022 and expectations for long-term growth in export volumes. With associated gas production in the Permian Basin strong alongside oil output reaching a pandemic-era high last year – and holding close it early in 2023 – East Daley Analytics estimated that domestic production would rise by up to 5 Bcf/d over the course of this year and reach 104.5 Bcf/d late in 2023.
East Daley’s Robert Wilson, vice president of analytics, told NGI that producers already have set in motion the momentum necessary for ongoing growth this year, and the extra gas will be needed – but perhaps not right away.
Why?
While demand for U.S. LNG reached record levels in 2022 and is expected to remain elevated, no new domestic export facilities are slated to come online this year, limiting exporters’ ability to ramp up further to meet global energy needs. Europe, in particular, boosted its demand for LNG in the wake of recent Russian moves to cut off pipeline gas exports to the continent amid the Kremlin’s ongoing invasion of Ukraine. Europe is expected to do so again ahead of next winter.
Following a fire last June, the Freeport LNG facility in Texas is slated to return to service in stages by the end of March, steadily building back to 2.38 Bcf/d capacity. That will help balance supply/demand to a degree, Wilson said. But if East Daley’s output projection proves accurate and either the remainder of this winter or the coming summer prove modest in terms of demand, production levels may be too high this year to support a sustainable price recovery, he added.
“Of course, there are wildcards,” Wilson said. “The weather dramatically shifts and demand could increase with it. Production could always pull back. But from what we see now, it seems we could be oversupplied” in 2023.
Infrastructure Limits, Takeaway Woes
What’s more, late in 2022 and again early this year, cash prices in West Texas were under heavy pressure amid a surge in production, limited pipeline capacity, and takeaway constraints compounded by maintenance events.
Spot prices at the Waha hub in West Texas, for example, briefly flipped negative last year amid a supply glut. NGI’s Spot Gas National Avg. in the first week of January continued to more than double prices at Waha and several other Texas hubs, including El Paso Permian.
Analysts at The Schork Report noted that West Texas prices have been periodically under pressure for several years, and they expect this to remain the case, “owing to robust associated gas production and pipeline constraints throughout the market area.”

The American Gas Association’s (AGA) Morgan Hoy, senior market and regulatory analyst, told NGI that the United States needs to expand its production and delivery infrastructure to keep pace with demand – in Texas, the Northeast and elsewhere. She said positive momentum, however, could remain elusive because capacity limits exist in large part because of regulatory restraints and political pressure to curb fossil fuel development to help combat climate change.
Hoy, however, said the AGA’s outlook shows natural gas demand enduring for decades. Without more infrastructure to both deliver more gas to domestic markets and to move fuel to the Gulf of Mexico for export, the United States could struggle to meet energy needs at home as well as a string of future LNG facilities expected to launch later this decade.
“We have the gas, but we do have serious concerns about having the needed infrastructure to get it where it needs to go,” Hoy said.
RBN Energy LLC CEO Rusty Braziel shares those concerns, though he is optimistic that needed infrastructure will get developed in the wake of Russia’s war and its unintended effect of amplifying the importance of natural gas – specifically U.S. gas.
RBN expects Lower 48 year-on-year dry gas production to increase by up to 5-7 Bcf/d in 2023.
“Where will all that incremental gas go, assuming power generation is already taking a lot of supply and exports will max out? The answer is…inventories,” Braziel said. “And as inventories build, that will most likely translate to lower prices versus 2022.”
However, he added, “for you gas bulls out there, don’t get too down in the dumps. Starting in 2024, new LNG export capacity starts to ramp up, potentially turning into a torrent over the coming years. Can production growth keep up with all that LNG export capacity? Probably so. But it will be touch and go in some years, with little chance of gas market oversupply conditions coming back after 2023 for a very long time to come.”
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