Iran conflict reshapes energy markets as US gas demand surges

WASHINGTON DC: US industrial natural gas consumption is headed for a structurally higher path with consumption to stay above historical levels till at least 2027, amid increased turmoil in global oil markets on account of the Iran War and tightness in energy supplies around the world.

US Energy Information Administration’s (EIA) latest STEO estimates show that industrial consumption of natural gas in the US averaged a record level of 23.6 billion cubic feet per day (bcfd) last year, above the earlier all-time high of 23.4bcfd hit in 2023.

Analysts believe that increasing industrial natural gas demand is not only becoming more pronounced, but is becoming more structural with changes in manufacturing, energy trade, and global logistics.

EIA expects further growth in industrial natural gas demand to be 1.2 percent, or 0.3bcfd, in 2026 and 1.7 percent or 0.4bcfd, next year.

Behind the trend are robust gains in energy-intensive manufacturing activities such as chemicals, fertilizers, metals processing and export-driven industries. Energy cost differentials between the US and other developed nations such as Europe and even parts of Asia where fuel costs are relatively higher are also seen driving growth in industrial gas demand in the US.

“Continued efficiency improvements reduce the amount of natural gas needed per unit of output,” the EIA noted, indicating that overall demand growth would likely have been substantially higher without technological gains in industrial energy use.