Bank of America Raises Natural Gas Price Forecast Amid Supply Concerns

Bank of America has revised its price forecast for Henry Hub natural gas upward for the second half of 2026, citing concerns over a tightening supply-demand balance. The bank raised its projection to $3.8 per million British thermal units (MMBtu), an increase from the previous forecast of $3.6. The revision is based on the risk of natural gas inventories entering the winter heating season below 3.8 trillion cubic feet.

The adjustment follows a period of price volatility. After averaging higher year-over-year from January 2025 to January 2026, domestic prices fell due to mild temperatures from late February through April. Although prices have averaged lower year-over-year since February, the market balance has tightened to levels not seen since 2024, and prices have recovered from their April lows.

Surging demand is a key factor behind the tighter market conditions. Demand from liquefied natural gas (LNG) export facilities during the second quarter of 2026 was approximately 3.1 billion cubic feet per day higher than a year earlier. The bank expects U.S. LNG feedgas demand to grow by nearly 4 billion cubic feet per day over the next 18 months as new facilities become operational. Additionally, gas-fired power plants have increased their share of electricity generation at the expense of coal.

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On the supply side, growth in U.S. natural gas production has been offset by the rise in demand. Production levels remain below the highs seen in December 2025. The situation is further compounded by reduced pipeline gas imports from Canada, where new domestic LNG facilities are consuming a larger portion of the country's production.

Looking further ahead, Bank of America maintained its 2027 Henry Hub price forecast at $4 per MMBtu, indicating an expectation of sustained price firmness into the medium term.