Morgan Stanley said in a new report that natural gas prices could rise to $5 per million British thermal units (mmbtu) by 2026 as demand grows and supply stays limited.
The bank expects U.S. gas storage to end October at around 3.97 trillion cubic feet, about 5% higher than usual. But it predicts that inventories will shrink quickly over the next few quarters as the market tightens.
Analysts said that liquefied natural gas (LNG) demand is growing steadily, while production remains weak. As a result, they see the market moving toward a shortage during the winter and through next year, which could drive prices above $5 in 2026.
Morgan Stanley added that winter weather and heating demand will play a major role in determining how fast the market tightens.
Production data already shows a slowdown. October output has averaged about 1 billion cubic feet per day less than in September, with the biggest drop seen in the Haynesville shale region. Although the number of gas drilling rigs increased slightly in the past month, overall activity is still far below the level needed to meet rising LNG export demand.
LNG exports have hit record highs this month, with feedgas flows averaging 16.5 billion cubic feet per day—up from September. The Plaquemines LNG terminal has received approval to start up its final two processing units, and the Golden Pass project remains on schedule to begin production later this year.
Overall, Morgan Stanley expects the mix of strong export demand, low production, and a cold winter could set the stage for significantly higher gas prices in 2026.
