Tuesday, November 26, 2024

Natural Gas Outlook 2025: Will We Witness the Return of the King?

Natural Gas Outlook 2025: Will We Witness the Return of the King?

Practical Investment Analysis for the New Energy Economy

Natural Gas Outlook 2025: Will We Witness the Return of the King?

Keith Kohl | Nov 26, 2024

You still have a few weeks to become a gas bull. 

Don’t worry, I’ll look the other way as people start slowly making their way over to our side of the aisle; there’s room for everyone. 

There’s no shame for going over to the dark side. After all, natural gas prices at the Henry Hub have fallen since spiking in 2022. The average price per MMBtu dropped to $1.49 last March. 

To put a little perspective on this, that’s the lowest average monthly price we’ve seen in decades — lower than any other monthly average since 1997 when the EIA started recording the data!

Go ahead and take a look for yourself:

(Click to Enlarge Image)

Oh, we’ve certainly come close to last March’s low back in 2020 just before the COVID lockdowns hit. Yet, even during the pandemic our thirst for more natural gas continued to grow. 

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In my eyes, natural gas is the undisputed king of U.S. energy demand. Sure, we use more petroleum, but that demand is concentrated on just two areas: Our transportation and industrial sectors.

Natural gas, on the other hand, accounted for 36% of total U.S. energy consumption in 2023 — just shy of petroleum. However, the difference is that it’s utilized in more sectors, from its 42% share of our electricity and industrial energy demands, to the 41% of residential energy consumption and more than one-third of the energy we use in the commercial sector. 

Nobody is doubting the crucial role it’s about to play in our upcoming AI boom, too. I told you before that the path to electrification will be paved in natural gas. 

And still, this vital component of our energy dynamic is largely dismissed. We have a nasty habit in the U.S. of dismissing energy sources when prices are in the basement. 

Well, that’s about to change… and it’s about time.

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Natural Gas Outlook 2025

All it’s going to take is one major storm, or perhaps one colder-than-expected winter, for investors to realize how important natural gas is to our everyday lives. 

Europe already got a small taste of that from the dreaded Dunkleflaute that hit not too long ago. 

But it’s the reversal of the IEA’s opinion that will really tell the tale. In its Global Gas Security Review 2024, the group made it quite clear that global gas markets are a fragile thing. 

While global gas demand is expected to hit all-time highs in 2024 and 2025, with year-over-year demand growing 2.8% during the first three quarters of this year, consumption will continue rising into next year. 

That may be a bit of a problem given the limited LNG capacity additions coming online this winter — we can thank President Biden’s pause on LNG permitting for that.  

Now about that pesky cold winter… the U.S. is already gearing up for winter storms that may be a bit frustrating if you need to travel for Thanksgiving.  

We’ve been spoiled with two consecutive warm winters, and the potential cold snap is already pushing prices higher at the Henry Hub. 

Looking at EIA projections, natural gas prices are expected to average $2.80 per MMBtu over the next few months. 

Normally we’d shrug off any demand increases, especially considering the flood of natural gas flowing out of tight wells in plays like the Marcellus, or associated gas from oil wells in the Permian Basin. 

You might want to rethink that bearishness. Even the EIA is forecasting natural gas production to stay relatively flat this year compared to 2023. 

That alone will put a premium on a certain group of natural gas stocks that are already in place to take advantage of higher demand and a colder winter.

We’ll talk about those next time.

Until next time,

Keith Kohl Signature

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing's Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.

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