U.S. natural gas output is on track to set fresh records over the next two years. According to the U.S. Energy Information Administration’s Short-Term Energy Outlook, production is projected to rise from 107.6 bcfd in 2025 to 111.7 bcfd in 2026 and 115.9 bcfd in 2027.
The agency says the story is not only about supply. Domestic demand and consumption are also expected to reach record levels over the same period. The report attributes that trend to better drilling efficiency, stronger electricity demand and expanding liquefied natural gas (LNG) export capacity, even as producers remain selective with capital spending.
Growth is being driven largely by the Permian and Haynesville shale gas regions. Reuters noted that EIA’s September outlook for 2026 was stronger than its August forecast, with the production estimate lifted from 111.2 bcfd to 111.7 bcfd, while the demand outlook also moved above the earlier 92.0 bcfd projection.
EIA also expects average U.S. LNG exports to increase from a record 15.1 bcfd in 2025 to 17.4 bcfd in 2026 and 18.6 bcfd in 2027. That increase is tied to expanding export infrastructure and additional energy demand. At the same time, U.S. gas inventories are expected to enter winter on Oct. 31 at about 5% above the five-year average.
A separate Ernst & Young study found that the U.S. oil and gas industry is placing greater emphasis on improving the performance of existing assets while maintaining disciplined growth. The report said mergers and acquisitions remain important in reshaping portfolios, but producers are increasingly prioritizing operational performance, capital efficiency and stronger returns from current assets.
Recent major deals cited in the study include the $10 billion all-stock combination of Tamarack Valley Energy (TSX:TVE) and Headwater Exploration (TSX:HWX), Diversified Energy’s (NYSE:DEC) $1.8B acquisition of Birch Permian Holdings, Chevron’s (NYSE:CVX) $53B takeover of Hess Corp, and ExxonMobil’s (NYSE:XOM) takeover of Pioneer Natural Resources for $$59.5B.
At the same time, EY said total capital expenditures fell 49% year over year, while M&A spending dropped 70%. The study reviewed five years of performance data from the 30 largest publicly traded exploration and production companies.
In oil, production reached a study-period high in 2025, but reserve additions from extensions and discoveries fell 11% and, for the first time since 2021, did not fully replace produced volumes. Combined oil reserves declined by less than 1%.
Natural gas showed stronger fundamentals. Production rose 18%, reserves increased 14%, discoveries climbed 21%, and reserve additions turned positive for the first time since 2021. EY added that long-term demand is being supported by rising LNG use, higher electricity consumption, and the buildout of AI-related infrastructure and data centers.
