The U.S. Energy Information Administration (EIA) has revised its forecast for U.S. natural gas and crude oil prices for 2025, reflecting changes in market conditions driven by weather patterns, inventory levels, and global production trends.
The latest Short-Term Energy Outlook (STEO), released in March, highlights adjustments based on recent developments, particularly the colder-than-expected end to February, which significantly impacted natural gas consumption and storage levels.
Colder weather conditions in early 2025 led to increased natural gas demand, causing substantial withdrawals from storage. As a result, EIA expects U.S. natural gas inventories to decline to below 1.7 trillion cubic feet by the end of March, which is 10 percent lower than the five-year average for that period. The combination of lower inventories and heightened consumption has pushed EIA to revise its natural gas price forecast upward. The agency now predicts the Henry Hub spot price to average around $4.20 per million British thermal units (MMBtu) in 2025, an 11 percent increase from the previous forecast, with further increases anticipated in 2026, where the price is expected to reach approximately $4.50/MMBtu.
On the crude oil front, EIA forecasts continued tightness in global oil markets through mid-2025, followed by an increase in inventory levels in the latter half of the year. This trend is partly attributed to declining crude oil production in countries like Iran and Venezuela, which will keep supply constrained in the short term. Consequently, Brent crude oil prices are projected to rise from around $70 per barrel to about $75 per barrel in the third quarter of 2025. However, as OPEC+ gradually unwinds production cuts and non-OPEC nations ramp up their oil production, global oil inventories are expected to increase, leading to a decline in oil prices. By 2026, EIA anticipates Brent crude oil prices to average around $68 per barrel.
The forecast also acknowledges various uncertainties that could affect price movements, including recently announced sanctions against Iran and the revoked oil export licenses for Venezuela. These geopolitical factors introduce volatility into the oil market, potentially altering supply dynamics and price trends beyond current projections.
In the electricity sector, EIA foresees a 3 percent increase in U.S. power generation in 2025 compared to 2024. This growth is driven by higher-than-expected electricity demand, particularly in the residential and commercial sectors. The commercial sector’s electricity consumption is notably influenced by the expansion of data centers, while residential electricity demand has been elevated due to cold weather conditions earlier in the year that required more heating. Compared to last month’s projections, the latest forecast represents a slightly higher expected growth rate, increasing from 2 percent to 3 percent.
Overall, EIA’s updated energy market projections reflect the dynamic interplay of weather patterns, inventory levels, production changes, and global geopolitical events. While natural gas prices are expected to rise due to higher consumption and lower storage levels, oil prices are anticipated to peak in mid-2025 before gradually declining as supply conditions improve. Electricity demand is projected to continue growing, particularly in response to both seasonal factors and structural increases in commercial power usage. However, uncertainties remain, and EIA’s forecast could evolve further as market conditions shift.