Producers Face A Familiar Disconnect In 2026

U.S. natural gas markets appear to be entering 2026 with a sense of déjà vu. Although the snowstorm sweeping the country has spiked prices over $5 per mcf and short-term futures prices over $6 (with local prices spiking far higher than that in certain areas), overall outlook for most prognosticators is below $4 for most of the year. Prices remain volatile, equities have struggled to find consistent footing and investor sentiment still skews cautious. Yet beneath the surface, production behavior, infrastructure progress and demand growth are aligning in ways that look more constructive than public market indications might suggest.

This disconnect is not new. Natural gas has long been viewed by many as a trading commodity rather than a long-duration asset. What is different in this cycle is that producers, infrastructure developers and capital providers seemed to have adjusted faster than equity markets. Supply growth these days is constrained more by choice and infrastructure, and less by geology. Demand is increasingly anchored by LNG exports and power generation tied to data centers; and capital structures are increasingly designed to wait rather than force growth or exits.

The result is a market still pricing gas for volatility, while fundamentals quietly tighten.

Supply Discipline Has Become More Structural

The most visible change in U.S. natural gas markets over the past several years has been the industry’s response, or lack thereof, to price signals. I’ve written on this pattern before. Even as Henry Hub prices have rebounded from cyclical lows, natural gas rig counts remain well below historical norms. The reflexive growth response that once defined gas cycles has largely disappeared.

US Natural Gas Rig Count vs. Henry Hub Prices

EIA & Baker Hughes

Producers have prioritized balance sheet stability, free cash flow and capital returns over volume growth. That discipline has proven durable over the past few years, suggesting it has become structural rather than opportunistic. Public operators, still shaped by the lessons of the last decade, appear unwilling to sacrifice capital efficiency for near-term market share.

This restraint matters because it reduces supply elasticity. Price volatility may persist, but the ability and willingness of the industry to rapidly oversupply the market has diminished. That sets a different backdrop for evaluating medium-term pricing and valuations than prior cycles offered.

Another element that can impact supply in incremental chunks is pipeline and infrastructure expansion. For example, the in-service start of the Mountain Valley Pipeline marked a meaningful milestone for Appalachia. After years of legal and regulatory delays, the project provided incremental takeaway that improves market access for Marcellus and Utica producers. Other projects are also moving along as shown in the table below:

However, the impact should not be overstated. The MVP does not unleash unconstrained growth. Instead, it restores optionality. Producers gain better pricing realizations, improved basis exposure and flexibility in development pacing. Smaller brownfield expansions, compression upgrades and lateral connections now carry more value than headline-grabbing greenfield projects.

Meanwhile, in the Permian, natural gas dynamics remain tied to oil activity. Associated gas volumes continue to grow, but takeaway constraints persist. Periodic pipeline maintenance and delays in downstream capacity additions have reinforced volatility at natural gas hubs such as Waha.

Prices Remain Volatile, But The Floor Looks Better Defined

Natural gas prices are unlikely to lose their volatility anytime soon. Weather patterns, storage levels, geopolitical events, and global LNG flows will continue to drive short-term swings. What has changed is the industry’s ability to respond.

With supply elasticity reduced and infrastructure constraints still present, price collapses could increasingly reflect demand-side shocks rather than structural oversupply. NYMEX forward curves and producer surveys suggest stabilization rather than a return to sustained sub-$2 pricing environments.

One respondent to the most recent Dallas Fed Energy Survey framed it this way: “The supply-demand issues for natural gas are finally heading into a bull phase. Liquefied natural gas (LNG) and the expected demand on electric grids are coming… Additional energy will be needed to power the data centers. It appears likely, therefore, that the price of natural gas will increase.”

This does not eliminate downside risk, but it reframes it. Price risk is increasingly front-loaded, while cash flow normalization trends towards being back-loaded. That timing mismatch continues to weigh on equity valuations.

LNG: The Marginal Demand Driver

Liquefied natural gas exports, which have been ramping up for years, now sit at the center of U.S. natural gas fundamentals. Growth in export capacity has reshaped domestic balances, tying incremental demand to global markets.

Even as global LNG prices softened in parts of 2025, U.S. LNG export volumes continued to rise. Feedgas demand proved resilient, underscoring that U.S. projects compete on cost, reliability and destination flexibility rather than spot pricing alone.

For producers, LNG exposure is basin-specific. Haynesville and Permian-associated gas benefit most directly, while Appalachia gains indirectly through improved national balances. The key point is that LNG demand is structural, multi-year and infrastructure-backed.

Data Centers: A Second Demand Pillar

Alongside LNG, data center–driven power demand is quietly becoming a meaningful source of incremental gas consumption. Growth in artificial intelligence, cloud computing and digital infrastructure is driving regional electricity demand higher, particularly in Texas, the Southeast and parts of Appalachia.

Gas-fired generation remains essential to meeting this demand. Renewable capacity continues to expand, but reliability requirements favor dispatchable generation. Gas plants provide baseload support, peaking capacity and backup for intermittent sources.

Unlike traditional industrial demand, data center–related gas consumption is long-duration and relatively price-insensitive. Once built, facilities anchor demand for decades.

Mixed Equity Performance Reflects How Markets Are Interpreting Gas Risk

A closer look at the performance metrics of publicly traded natural gas–focused E&Ps highlights why valuations remain unsettled. As shown in the accompanying table of gas-weighted producers, equity performance, cash flow trends and valuation multiples are not moving in lockstep.

Several companies show negative or muted share price performance over the past year, even as enterprise value–based multiples remain elevated or stable. Others have seen equity prices hold up relatively well despite declining EBITDAX or near-term cash flow pressure. This divergence is not a contradiction; it is a signal.

In today’s market, price performance is reacting to spot gas volatility, while valuation multiples are increasingly anchored to balance sheet strength, inventory depth and infrastructure optionality. In other words, markets are discounting earnings but not necessarily assets.

The table also underscores a second theme: gas-focused E&Ps are no longer being valued as a homogeneous group. Appalachia-heavy producers with low-cost inventory and improving takeaway often trade somewhat differently than Haynesville operators tied more directly to LNG timing, while companies with meaningful associated gas exposure face a separate set of risks tied to oil-driven development.

Importantly, mixed performance does not imply investor confusion. It appears to reflect selective underwriting. Equity markets differentiate between companies that can withstand prolonged volatility and those that still require price normalization to unlock value.

That discernment helps explain why enterprise value multiples have proven more resilient than equity prices. Investors appear willing to ascribe long-term value to gas assets but remain hesitant to re-rate equities until price signals become clearer and demand growth becomes more visible in reported cash flows.

Capital Structures Have Adapted Faster Than Public Markets

Perhaps the clearest signal that fundamentals are tightening comes not from prices, but from capital behavior. Private capital, particularly family offices and continuation vehicles, has poured into upstream gas assets with longer time horizons than traditional private equity.

These investors are not as constrained by fixed exit timelines. They have more ability to hold assets through price cycles, adjust development pacing and wait for infrastructure and demand growth to materialize. The result is fewer forced sales and less distressed supply.

M&A Reflects Selectivity, Not Capitulation

Upstream deal activity slowed through 2025 and remains choppy heading into 2026. Yet the slowdown reflects valuation gaps and execution challenges, not a lack of capital or interest.

Gas-weighted and LNG-linked assets continue to attract strategic and international buyers, particularly those seeking long-term supply security. Transactions that do occur tend to emphasize scale, infrastructure access and inventory depth rather than speculative commodity price growth.

A Market Still Waiting On Itself

Natural gas markets in 2026 look less like a sector in decline and more like one waiting for its own fundamentals to be recognized. Supply growth remains disciplined. Pipelines add optionality without overshoot. LNG and data centers absorb incremental volumes. Capital is structured to wait.

Eventually, market valuations catch up to structural realities. Until then, the disconnect persists; not because fundamentals are weak, but because patience often remains scarce.