Wood Mackenzie Flags Rising US Gas Cost Floor as Henry Hub Holds Near $2.89

Wood Mackenzie Flags Rising US Gas Cost Floor as Henry Hub Holds Near $2.89 A structural shift in US gas supply economics is building a bullish medium-term case even as Permian production growth keeps NYMEX Henry Hub front-month well below analyst price targets for 2026. NYMEX Henry Hub front-month traded at $2.89/MMBtu on Friday (2026-07-17), down fractionally on the session, while a Wood Mackenzie warning from July 8 (2026-07-08) continued to shape the medium-term debate. The consultancy said the share of US gas supply produced at near-zero marginal cost is expected to fall below 20% over the next decade. With supply less responsive to price signals than in the past, Wood Mackenzie argued prices will need to go higher and stay higher to incentivise new production.⁷ The gap between that structural argument and the current price is plain. The EIA raised its Henry Hub price forecasts for 2026 and 2027 in its June (2026-06-16) short-term energy outlook, with its projection pointing toward an average near $3.50/MMBtu for this year. Morgan Stanley has outlined a scenario where prices surge to $5/MMBtu. At $2.89, the front-month sits roughly 60 cents below the EIA's annual average expectation with more than half of 2026 elapsed.^6,2 Production expansion explains the discount. L48 marketed gas output averaged 117.2 Bcf/d in the first quarter of 2026, the EIA reported, a 4% increase over the same period in 2025. A second EIA estimate put Q1 L48 production at 120.2 Bcf/d. The agency forecasts full-year output up 3% versus 2025, with the Permian basin expected to produce 29.2 Bcf/d in 2026, up 6% year-on-year, providing the primary volume lift. Haynesville, the main dry gas producing basin, is forecast to add 6% this year and 8% in 2027.^1,5 A storage-driven bearish signal is running as a contrarian weight against the broader bullish market view, which counts 29 signals in the bullish direction. Inventories drew down sharply in winter: the EIA reported US gas stocks at 2,070 Bcf as of February 13 (2026-02-13), down 144 Bcf week-on-week, 2.8% below the prior year and 5.6% below the five-year average. That winter draw was absorbed during injection season, and production has kept storage from tightening in a way that would close the gap to analyst price targets.³ Wood Mackenzie's cost-curve argument is medium-term, not a front-month call. The consultancy noted Henry Hub is a localised benchmark shaped by supply, demand and pipeline infrastructure conditions in southern Louisiana, not a proxy for global gas tightness. JKM, the Northeast Asian spot LNG benchmark, held at $19.92/MMBtu on Friday (2026-07-17), a spread of roughly $17/MMBtu above Henry Hub. At that gap, US LNG export economics remain attractive enough to sustain demand pull on the domestic benchmark.⁷ US LNG export activity gives Henry Hub a floor it lacked before the Gulf Coast liquefaction buildout. Thirty-seven LNG vessels with combined carrying capacity of 139 Bcf departed US ports in the week of January 15 to 21 (2026-01-15 to 2026-01-21), according to shipping data cited by the EIA. That volume of continuous export demand is one reason the bullish signal count remains elevated even when the spot price is subdued.⁴ Friday's (2026-07-17) macro backdrop added a headwind across energy. ICE Brent crude front-month fell 1.16% to $86.00/bbl and WTI crude front-month dropped 1.10% to $80.80/bbl, while the VIX rose 10.77% to 18.51, pointing to broad risk-off positioning. Henry Hub's more modest decline, down 0.34% on the session, reflects differing supply and demand dynamics, though a sustained macro deterioration would weigh on industrial gas consumption. In the week of May 11 (2026-05-11), global gas benchmarks diverged: Asian LNG firmed on renewed buying interest while US and European prices softened on milder weather, stronger supply and improved market conditions, Canada LNG Group reported. That divergence pattern is likely to recur through summer, with JKM supported by Asian cooling demand while Henry Hub navigates Permian output against the LNG demand floor.³ The front-month will need sustained summer cooling demand to close the gap to the EIA's $3.50/MMBtu annual average. Southeast power sector gas consumption rose 17% (1.3 Bcf/d) during mid-winter cold weeks tracked by the EIA, with residential and commercial use up 54%. A summer cooling event of comparable scale would shift the near-term supply-demand balance. Without it, the structural cost-floor shift Wood Mackenzie outlined on July 8 (2026-07-08) is more likely to price into the 2027 curve than to lift the 2026 front-month above the production surplus now capping it.^4,7,1