Citi comments on Permian Basin entering multi-year natural gas growth cycle

Investing.com -- The Permian Basin is entering a multi-year infrastructure-led growth cycle for natural gas, according to Citi analysts. The development addresses a chronic takeaway bottleneck that has plagued the region.

The current build-out differs from prior cycles as durable demand from rising U.S. LNG exports and AI data centers is driving earlier and more substantial industry investment. Citi expects the Permian to become the largest gas producing basin, adding to its position as the top oil producer.

Four recent project announcements mark what Citi views as an inflection point. Combined with earlier additions and accelerating U.S. LNG export capacity, the developments should moderate Waha Hub price differentials and support oil-directed drilling economics through 2030.

Permian gas production rose from 17.2 billion cubic feet per day in 2021 to an estimated 27.6 bcf/d in 2025. Pipeline capacity failed to keep pace, resulting in pricing dislocations at Waha through 2024 and 2025, with worse conditions in the first half of 2026.

U.S. LNG export volumes are projected to rise materially through 2030. The EIA's August 2026 Short-Term Energy Outlook forecasts natural gas consumed by the U.S. power sector will reach a record 46.1 bcf/d in summer 2027, up approximately 6% from summer 2025 and 2026 levels.

ERCOT natural gas-fired generation is projected to rise roughly 22% between summer 2025 and summer 2027, largely due to data center-driven load growth. Texas regulators paused new interconnection approvals earlier this month, prompting the EIA to trim its 2027 estimate.

Citi expects Permian exploration and production companies to secure firm capacity through pipeline equity ownership and long-term dedications. The firm cited Devon Energy and Diamondback Energy (NASDAQ: FANG) via Solitude, as well as Exxon Mobil with Targa Resources.

Over the past month, gas E&P stocks rose approximately 4.4%, while forward gas strip prices remained flat and prompt-month prices stayed depressed. Citi's storage supply and demand model shows actual inventory builds consistently below forecasts over the past month by 1.6 bcf/d.

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