US natural gas production is beginning to show price sensitivity

Overview

This is a Goldman Sachs commodities comment on natural gas, focusing on whether US gas supply is starting to slow in a lower-price environment. The report notes that Henry Hub recently moved back above $3/mmBtu, with apparent drivers including weather expectations, storage injections, European gas linkage, and lower Haynesville production, but the most investable takeaway is that Haynesville production growth has been weaker than expected, showing that US dry gas supply is still sensitive to price incentives.

Core views

Goldman Sachs believes the natural gas market in summer 2026 is not clearly tight, nor is it congested at the current $3.17/mmBtu Bal Sum26 strip or near-$3 prompt price; a more reasonable interpretation is that there is a price range that can balance the market. More valuable than the short-term price path is watching how Haynesville production responds to price. If Haynesville keeps growth more restrained at low prices, it may help limit the downside risk to Henry Hub prices from Permian associated gas expansion in 2027.

Analysis framework

The report compares changes in Haynesville production during 2025 and early 2026 to early summer, and combines that with Henry Hub prices, rig counts, weather CDDs, storage injections, European TTF linkage, and expectations for Permian pipeline expansion to judge the marginal price elasticity of US gas supply. The focus is not a single price forecast, but changes in supply behavior across different price ranges.

Methodology notes

• Commodity supply-demand balanceNatural gas supply price elasticity analysis

  Use the relationship between the price environment and output changes to determine whether producers slow production growth when prices are low.

  The report compares Haynesville's higher Henry Hub prices and production gains from Jan-May 2025 with lower prices and production declines from Jan-May 2026 to show that drilled-but-uncompleted well inventories and price incentives affect supply release.

• Regional output comparisonHaynesville vs. Permian supply decomposition

  Differentiate the impacts of dry-gas basins and associated-gas basins on the US gas balance.

  Haynesville output is more directly affected by natural gas prices, while Permian associated gas growth is driven more by oil and gas development and pipeline capacity; together they determine how loose supply and demand will be in winter 2026 and summer 2027.

• Market price driversTracking weather, storage, and cross-market linkages

  Short-term Henry Hub prices may be driven by weather CDDs, storage injections, and linkage to European TTF prices.

  The report believes the recent Henry Hub/TTF linkage is more likely driven by trading algorithms than by a substantive change in US gas fundamentals caused by Hormuz disruptions.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Henry Hub natural gas

  Core pricing benchmark in the report

  Strengths

  Supported in the short term by weather expectations, tighter storage injections, and lower Haynesville output.

  Weaknesses

  In 2027 it still faces downside risk from a large increase in Permian associated gas that could loosen supply and pressure prices.

  Comparison

  Compared with European TTF, Henry Hub fundamentals were not materially changed by Hormuz disruptions; the recent linkage is more likely driven by trading algorithms.

  Risks

  If supply surplus widens in 2027, the $3.50/mmBtu forecast has downside risk.

• Haynesville dry gas production

  Key marginal supply variable

  Strengths

  Growth is slowing at lower prices, indicating some self-correcting behavior on the supply side.

  Weaknesses

  Rig counts have already risen materially in Q1 2026, which could still lead to incremental wells and a production rebound.

  Comparison

  This year's performance is significantly weaker than the same period last year: May 2026 is about 200 mmcf/d below December 2025, versus about 800 mmcf/d of growth in the same period last year.

  Risks

  Maintenance factors may distort short-term output signals, and producers could accelerate new supply once prices recover.

• Permian associated gas

  One of the main sources of 2027 supply looseness

  Strengths

  Additional pipeline capacity supports output growth and winter supply.

  Weaknesses

  If growth is too fast, the summer 2027 market could move closer to congestion.

  Comparison

  Unlike Haynesville, Permian associated gas is driven more by oil and gas development and takeaway capacity, and is not determined solely by gas prices.

  Risks

  If new pipeline capacity comes online and output reaches Goldman Sachs' assumption, Henry Hub downside pressure could increase.

Key data

• Recent Henry Hub priceThis week it moved back above $3/mmBtu; the Bal Sum26 strip is about $3.17/mmBtuFirst move back above this level since late March.
• Goldman Sachs summer 2026 forecast$3.50/mmBtuThe report says the current market is not a single path, but rather a price range that can balance the market.
• Haynesville 2025 production changeUp about 800 mmcf/d from December 2024 to May 2025Average Jan-May 2025 Henry Hub prompt price was about $3.70/mmBtu.
• Haynesville 2026 production changeDown about 200 mmcf/d versus December 2025Jan-May 2026 Henry Hub prices averaged about $3.19/mmBtu, and were below $3 in April and May.
• Haynesville April 2026 comparisonApril 2026 was up only about 200 mmcf/d from December 2025The same period last year was up about 700 mmcf/d, showing that growth is much weaker this year.
• Additional pipeline capacity in 2H 2026Permian adds about 4.5 Bcf/d of pipeline capacityGoldman Sachs expects this to support a meaningful increase in Permian associated gas output this winter.
• 2027 Permian gas assumption27.8 Bcf/d in December 2027, 3.4 Bcf/d above current levelsThat increment could push the summer 2027 market closer to congestion.

Impact & implications

The investment takeaway is that the market should not price 2027 looseness risk solely on Permian associated gas growth; it should also watch whether Haynesville production slows on its own in a low-price environment. If Haynesville growth is more restrained, Henry Hub downside risk could be partially cushioned; if Haynesville ramps up quickly after prices recover, congestion and downside price pressure in 2027 could increase again.

Risks

• Permian associated gas growth in 2027 could bring the US gas market closer to congestion and push Henry Hub prices lower.
• Higher Haynesville rig counts could translate into new wells in Q4 2026, weakening the current signal of slower production growth.
• Weather forecast changes and CDD volatility may continue to affect short-term Henry Hub prices.
• If storage injections rise above expectations again, short-term price support could weaken.
• Algorithmic trading linkages between Henry Hub and TTF could cause short-term price deviations from US fundamentals.

What to watch

• Whether Haynesville production remains stable for the rest of summer 2026 or rises by about 800 mmcf/d by October, as Goldman Sachs expects.
• How Henry Hub in the $3 to $3.50/mmBtu range affects producers' development pace.
• Whether new Haynesville wells are released in Q4 2026 as rig counts rose in Q1.
• The start-up timing and utilization of the additional 4.5 Bcf/d of Permian pipeline capacity in the second half of 2026.
• Whether the US gas balance in summer 2027 moves closer to congestion because of Permian associated gas growth.
• Disruptions to Henry Hub short-term pricing from weather CDDs, storage injections, and TTF linkage.