Analyst predicts lower prices to start ‘24

Natural gas prices will likely rebound in second half of next year, DBRS Morningstar says

North American gas markets are likely to be weak through the early part of 2024, according to a new outlook from industry analysts at DBRS Morningstar.

The analysts point to higher-than-average underground gas storage inventories in the United States at the onset of winter as well as the possibility for warmer-than-normal temperatures this winter across the northern U.S., reducing heating demand, relatively weak consumption from industrial and commercial sectors, partly caused by a reduction in business activity from elevated interest rates, and strong production growth from key producing basins in the U.S. The combination of these factors will likely keep natural gas inventories at a heightened level through the winter months, leading to prices being held back in the near term.

“We project U.S. demand growth of between 3% and 4% in both 2024 and 2025,” the forecast states. “U.S. liquefied natural gas (LNG) exports are forecast to steadily grow over the next few years, as five new export projects are currently under construction, in addition to expansion at existing facilities. Currently, the delivered cost of U.S. gas to Europe of $4 per mcf–$7 per mcf is very competitive with other suppliers (assumes shipping costs of approx. $1 per mcf–$3 per mcf).”

Key Highlights of the 2024 and 2025 Price Forecasts

  • A surplus of natural gas through early 2024.
  • The U.S. supply/demand balance will gradually tighten as low gas prices tend to discourage new production while, simultaneously, incentivizing more demand. This should lead to a reduction in inventory and for the spot gas price to be bid higher.
  • For the full-year 2024, the NYMEX price will average $3.50/thousand cubic feet (mcf) and the AECO price will average CAD 3.00/mcf, in line with our previous forecasts.
  • For 2025, the forecast calls for an average NYMEX price of $3.50/mcf and AECO of CAD 3.00/mcf, also in line with prior expectations.

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