Wood Mackenzie projects Henry Hub natural gas prices will climb to approximately $5/MMBtu (in real 2026 terms) by 2035, signaling the end of a decade-long era of cheap gas. This shift is driven by rapid demand growth from data centers and LNG exports, coupled with increasingly expensive supply from dry gas plays.
This forecast is critical for energy markets as it redefines the risk calculus for investments in US gas economics, impacting upstream operators, LNG project developers, and long-term offtake negotiations. The structural change from supply-driven to demand-driven price formation at Henry Hub will necessitate higher, sustained prices to bring new molecules to market.
Executive Summary
A new Wood Mackenzie report, "Defying gravity: why US Henry Hub natural gas prices are set to rise," predicts a significant increase in Henry Hub natural gas prices, moving from a nominal $2-$4/MMBtu range to nearly $5/MMBtu by 2035. This upward trajectory is fueled by a projected 17 Bcf/d increase in US natural gas demand by the mid-2030s, largely from data centers and AI investments, alongside a doubling of LNG export capacity. Concurrently, the share of low-cost associated gas from oil-rich plays like the Permian Basin in total supply growth is expected to drop from roughly 50% to below 20% over the next decade, forcing reliance on higher-cost dry gas production.
What Happened
Wood Mackenzie analysts released a report on July 2, 2026, forecasting a structural shift in Henry Hub natural gas prices. The report highlights that the conditions maintaining prices between $2-$4/MMBtu for the past decade are no longer fully operational. This analysis points to robust demand growth and a transition towards higher-cost supply sources as key drivers for the anticipated price increase.
Key Developments
- Demand Surge: US natural gas demand is set to increase by an additional 17 Bcf/d by the mid-2030s, a nearly 50% rise from 2025 levels, primarily due to data centers, AI investment, and expanding LNG export capacity.
- Supply Cost Shift: Associated gas from oil plays, which accounted for half of US gas supply growth over the last decade at near-zero marginal cost, will fall below 20% of growth in the next ten years, increasing reliance on more expensive dry gas plays.
- Price Re-calibration: Henry Hub spot prices are projected to approach $5/MMBtu in real 2026 terms by 2035, as prices must rise and remain elevated to incentivize new supply from dedicated gas producers.
Regional Context
The US, as a major global LNG exporter, will see its domestic natural gas price dynamics increasingly influence international gas markets. The projected rise in Henry Hub prices could impact the competitiveness of US LNG exports and reshape global supply strategies, particularly for Asian and European buyers.
Market Impact
Traders and analysts should anticipate a more volatile and structurally higher Henry Hub, requiring a re-evaluation of hedging strategies and long-term contract pricing. Refiners, while primarily focused on crude, will see implications for associated gas economics, especially in regions like the Permian, as gas prices become less of a "near-zero marginal cost" factor. Investment decisions for new LNG projects and upstream gas development will be directly influenced by this revised price trajectory.
Outlook
Market participants should closely monitor the pace of data center and AI-driven power demand growth, alongside the development costs and production rates from key dry gas basins. The responsiveness of supply to these higher price signals will be crucial in determining the actual trajectory of Henry Hub prices in the coming decade.
