2023-2030 Natural Gas Forecast: Trends & Market Projections
In the chill of the holiday season, as the need for increased natural gas usage to keep us warm becomes more apparent, did you know that natural gas is projected to become the largest primary energy source by 2034? As businesses and households increasingly rely on this versatile fossil fuel for heating, understanding natural gas price trends and market projections becomes crucial for informed decision-making. Join us on a comprehensive exploration of the world of natural gas prices from 2023 to 2030, delving into the factors that drive them and the potential risks and uncertainties that lie ahead, including the price of natural gas forecast. Wishing you a season filled with warmth and insightful discoveries!
Key Takeaways
Natural gas prices are influenced by producers, importers, weather-related demand & supply dynamics.
Short and long term forecasts depend on factors such as storage levels & sustainable energy concerns.
Regional natural gas price outlooks vary due to geopolitical tensions, policy changes and technological advancements, stay informed for potential risks!
Natural Gas Market Overview
In the energy sector, natural gas holds a significant position. Formed from plant and animal remains, it’s a fossil fuel whose energy content is measured in million British thermal units (MMBtu). The global natural gas market is shaped by the activities of top producers and importers, with the US, Russia, Qatar, and Australia leading the pack in production. On the other hand, China, Japan, South Korea, and India dominate the list of top natural gas importers, driving demand and impacting natural gas price predictions.
One aspect of the natural gas market that’s gaining traction is the growth of liquefied natural gas (LNG). With a projected global demand increase of 50% over the next decade, LNG is set to play a significant role in the energy market landscape. Indeed, predictions suggest a 4% rise (or over 20 billion cubic meters) in the world’s LNG supply by 2023. Understanding the various factors that sway natural gas prices becomes increasingly relevant as we progress.
Top Producers and Importers
The big players when it comes to dry natural gas production are:
The US, with an annual production of 94.7 billion cubic feet per day (BCF/d)
Russia, with its Urengoy and Yamburg fields being the main contributors to its natural gas output
Qatar
Australia
These producers hold a significant role in molding the global natural gas market, as their actions directly impact supply and demand dynamics.
On the other side of the equation, the largest importers of natural gas imports are:
Japan
South Korea
India
These countries rely on imports from key suppliers such as Russia, Australia, and Qatar to meet their growing gas demands. As the top importers, their consumption patterns can have a significant impact on natural gas price predictions, making it essential to monitor their activities and preferences.
Liquefied Natural Gas (LNG) Growth
Liquefied Natural Gas (LNG) is a super-chilled fuel that’s gaining popularity as a means to meet global gas demand. In Europe, LNG demand is expected to grow by 25% by 2028 before experiencing a decline in the 2030s, as the European Union pushes for low-carbon energy sources. However, on a global scale, LNG demand is predicted to grow by a staggering 50% in the next 10 years.
This growth in LNG demand is driven by factors such as increasing population, economic growth, and a shift towards cleaner energy sources. As countries look to reduce their carbon emissions, natural gas emerges as a more environmentally friendly alternative to traditional fossil fuels like coal. The rising demand for LNG will undoubtedly play a significant role in shaping the natural gas market and influencing prices in the coming years.
Factors Influencing Natural Gas Prices
Natural gas prices can be quite volatile, with various factors influencing price fluctuations. These factors include:
Weather-related demand: Cold winters or hot summers can increase the demand for natural gas for heating or cooling, leading to higher prices. Conversely, milder weather can reduce the demand, resulting in lower prices.
Industrial activity: Increased industrial activity can drive up the demand for natural gas, leading to higher prices.
Supply disruptions: Any disruptions in the supply of natural gas, such as pipeline outages or production issues, can cause price fluctuations.
Changes in temperature and weather forecasts: Even small changes in temperature or weather forecasts can impact the natural gas market and lead to price fluctuations.
It is important to keep these factors in mind when considering natural gas prices.
Moreover, industrial activity can indirectly affect natural gas prices through its impact on demand. Increased demand from the industrial sector can lead to higher prices, while factors like natural gas production, imports, and storage inventory levels can also influence prices.
Subsequent sections will further analyze these factors and their implications on short-term and long-term natural gas price forecasts.
Weather-Related Demand
Weather conditions can have a significant impact on natural gas demand and prices. Historically, we’ve seen natural gas prices rise when temperatures drop, as more gas is pulled from storage to meet demand. On the flip side, unusually warm temperatures can lead to lower gas prices, as demand is suppressed. In fact, even changes in weather forecasts can affect price movements in the natural gas market.
Climatic patterns of the past decade have also influenced natural gas consumption. As more variable weather and a growing population drive up demand, there have been instances when natural gas consumption dropped despite cold spells and people staying home. Precise weather forecasting is imperative for managing storage operations and anticipating natural gas price movements.
Supply and Demand Dynamics
Supply and demand dynamics play a crucial role in determining natural gas prices. Factors such as:
exports to other countries
increased industrial usage
electricity production
cold weather
all affect the supply and demand of natural gas. Production levels, for example, directly impact prices, with an increase in production leading to lower prices and a decrease in production resulting in higher prices.
Storage capacity is another factor that influences natural gas prices. When natural gas storage inventories are high, it can help keep prices stable, while limited storage capacity can cause prices to be more volatile. Furthermore, the availability of alternative energy sources, such as renewable energy, can affect the demand for natural gas.
Considering these factors, we will analyze the short term energy outlook, focusing on natural gas price forecasts for both short-term and long-term periods.
Short-Term Natural Gas Forecast (2023-2024)
The recent Capex article detailed the Natural Gas price projection, according to the US Energy Information Administration anticipating a gradual increase in the U.S. benchmark Henry Hub natural gas spot price throughout 2023, rebounding from recent lows. The agency foresees the monthly average price climbing to $3.71/MMBTU in December, driven by heightened demand and reduced production.
Despite the anticipated mild winter conditions attributed to the El Niño phenomenon and ongoing production growth, Fitch Ratings has adjusted its Henry Hub Natural Gas price forecast for 2023 downward to $2.80 per thousand cubic feet (mcf). The revision extends to $3.25/mcf in 2024, down from the previous estimates of $3.00/mcf in 2023 and $3.50/mcf in 2024. However, Fitch maintains its unchanged long-term price prediction for natural gas (Henry Hub) at $2.75/mcf. The agency suggests that prices are unlikely to witness significant improvements in the near term beyond typical seasonal patterns and existing strip pricing. Rated natural gas producers in the U.S. and Canada are seen as relatively shielded from short-term price declines due to hedging strategies and strengthened balance sheets. Despite Henry Hub natural gas prices persistently remaining low in 2023, a recovery from the earlier $2.00 low in the year has been noted. While production continues to expand, the pace is expected to moderate as the decline in rig count gains traction. Fitch believes that the impact on production may not counterbalance the potential effects of warm winter weather, despite uncertainties surrounding the winter weather path and the production consequences of a rig count decline.
According to Trading Economics' Europe natural gas forecast, the fuel is expected to trade at 3.42 USD/MMBtu by the end of this quarter, with a subsequent rise to 4.12 in 12 months, as of mid-October 2023.
In a mid-December natural gas forecast, ANZ Research projected an LNG spot price averaging $32/MMBtu in 2023, marking a decline from $36.8/MMBtu in 2022. The price projection for super-chilled natural gas indicated a 26.5% drop to $23.5 in 2024.
Wallet Investor, relying on algorithm-based forecasting, expressed bullish sentiment in its natural gas price forecast for 2023. Emphasizing it as a promising long-term (one-year) investment, the service anticipated the natural gas price reaching a high of $3.48/MMBtu in December 2023 and closing the year at 3.20.
Price Fluctuations and Volatility
Short-term natural gas price fluctuations and volatility can be influenced by a variety of factors. For example, an unusually mild winter in Europe led to increased natural gas inventories, leading to a decline in natural gas prices during the 2022-2023 winter season. On the other hand, severe cold weather or unexpected supply disruptions can cause significant price hikes in the natural gas market.
The actual impact on natural gas prices will depend on the duration and severity of the event, as well as the overall supply and demand dynamics in the market. Hence, continuous monitoring of the various factors influencing natural gas prices is necessary when considering short-term investment opportunities or planning energy usage.
Long-Term Natural Gas Forecast (2025-2030)
In the Annual Energy Outlook 2023 (AEO2023) Reference case, the U.S. anticipates a 15% increase in natural gas production and a substantial 152% rise in liquefied natural gas (LNG) exports from 2022 to 2050. The projected growth is significant, with natural gas production expected to reach 42.1 trillion cubic feet (Tcf) by 2050. The surge in production is primarily attributed to the expansion of U.S. LNG exports, projected to reach 10 Tcf by 2050. The Gulf Coast and Southwest regions, particularly the Haynesville Formation and Permian Basin, are pivotal in this growth, benefitting from proximity to infrastructure connecting natural gas supply to expanding LNG export facilities.
The AEO2023 explores long-term energy trends in the U.S., employing various scenarios to understand the impact of different assumptions on energy trends. The Reference case, serving as a baseline, reflects laws and regulations in effect through mid-November 2022. Anticipated growth in natural gas production on the Gulf Coast and in the Southwest, by 52% and 50%, respectively, is closely tied to the proximity of the Haynesville Formation and Permian Basin to LNG export terminals in Texas and Louisiana.
The outlook foresees a sustained global demand for natural gas, making it economically viable to construct additional LNG export facilities in the U.S. Notably, new liquefaction facilities in Louisiana became operational ahead of schedule in 2022, and additional LNG trains in Texas are set to be online by 2025. Different side cases project varied production increases during the projection period, with the High Oil and Gas Supply and High Oil Price cases expecting the most growth. Conversely, the Low Oil and Gas Supply case foresees U.S. oil production decline, impacting associated dissolved natural gas and shale production, leading to reduced natural gas production on the Gulf Coast and in the Southwest. In the Low Oil Price case, lower Brent oil prices initially reduce LNG exports, but increased Gulf Coast shale production enables continued growth in natural gas production in this region through 2050, despite declines elsewhere.
Sustainable Energy Concerns
As countries worldwide prioritize sustainable energy and work towards reducing their carbon emissions, natural gas has emerged as a more environmentally friendly alternative to traditional fossil fuels like coal. Natural gas has a lower carbon footprint than other fossil fuels, releasing about half as much carbon dioxide per unit of energy as coal does. However, it’s still a fossil fuel, so it contributes to global warming.
As COP28 is held in the UAE, World leaders and experts are convening to address rising greenhouse gas emissions and their impact on climate at the annual United Nations climate change conference in Dubai. The conference, officially known as the UN Conference of the Parties (COP28), emphasizes reducing reliance on fossil fuels and establishing an international fund for climate adaptation. The summit requires states to adjust their climate plans based on reviews of progress toward the binding Paris Agreement of 2015, aiming to limit global temperature increase to 1.5 degrees Celsius by 2030. However, controversy surrounds the summit due to accusations of "greenwashing" by the UAE, with environmentalists and experts questioning the decision to host the climate summit in a country where oil and gas production dominates the economy. The demand for cleaner fossil fuels is driving the growth of natural gas in the energy market. Many countries are switching to natural gas from coal to reduce carbon emissions and improve air quality. As the world continues to focus on sustainable energy, the long-term outlook for natural gas prices will likely be shaped by these concerns and the resulting shifts in global energy policies.
Technological Innovations
Technological advancements in the natural gas industry play a significant role in shaping long-term price trends. Extraction techniques like hydraulic fracturing (fracking) and horizontal drilling have made it possible to extract natural gas from resources that were previously uneconomic. These innovations have increased production and turned unproven gas resources into proved reserves.
New technologies being developed to improve efficiency and sustainability in the natural gas industry include:
Drones
The internet of things
AI
Big data analytics
Electronic monitoring
These advancements have the potential to further impact long-term natural gas prices by increasing supply and making natural gas more affordable, especially as natural gas prices increased recently.
Regional Natural Gas Forecasts
Regional natural gas price forecasts vary, with the US, Europe, and Asia experiencing different trends and factors influencing their markets. In the US, natural gas prices are expected to decline in the next few years, with some forecasts predicting a rise after 2025. European natural gas prices may drop in 2023 due to diversification in energy, mild winter, and weaker demand, but face potential volatility due to geopolitical factors. In Asia, natural gas prices are expected to be driven by increasing demand for cleaner fossil fuels, particularly in China and other growing economies. To get a better understanding of regional natural gas price forecasts, we will analyze the price outlook in the US, Europe, and Asia.
US Natural Gas Price Outlook
The US natural gas price outlook is generally positive, with prices expected to decline in the short term. The US Energy Information Administration predicts that the monthly average Henry Hub price will reach $3.71/MMBtu in December 2023, with prices averaging $2.91/MMBtu for the year. This decline is attributed to factors such as steady production, demand, and competition from liquid fuels.
However, some future gas price predictions suggest a potential rise in US natural gas prices post-2025. It’s important to keep in mind that these predictions are subject to various factors, including weather conditions, storage levels, and geopolitical tensions, which can all impact the accuracy of natural gas price forecasts.
Potential Risks and Uncertainties
The accuracy of natural gas price forecasts is subject to potential risks and uncertainties, such as geopolitical tensions, technological advancements, shifts in global energy policies, and falling crude oil prices. Geopolitical tensions can have a significant impact on natural gas prices, as conflicts and disruptions in key exporting countries can lead to supply shortages and price spikes.
Technological advancements in the natural gas industry, such as improvements in extraction and production methods, can also impact prices by increasing supply and making natural gas more affordable. Additionally, shifts in global energy policies, particularly those focused on sustainable energy and reducing carbon emissions, can influence the long-term outlook for natural gas prices.
Staying updated about these potential risks and uncertainties allows for better preparedness for possible shifts in the natural gas market.
Summary
In conclusion, understanding natural gas price trends and market projections is essential for making informed decisions about energy usage and investments. Factors such as weather-related demand, industrial activity, and supply disruptions can all influence natural gas prices in the short term, while sustainable energy concerns and technological innovations may impact long-term price trends.
As we glide through the nuances of natural gas prices from 2023 to 2030, it's paramount for businesses to find a steady rhythm in managing their energy costs. In this dance of market projections, Neighborhood Energy takes the lead, helping companies secure competitive third-party rates for electric and natural gas. We specialize in providing the invaluable gift of budget certainty and peace of mind, acting as a stabilizing force in the face of market volatility.
As we wrap up the year and waltz into the holiday season, Neighborhood Energy extends warm wishes for a festive and joy-filled time. Just as we assist businesses in setting a secure ceiling on their energy costs, may your homes be filled with the cozy warmth of natural gas and the joyful spirit of Christmas.
Frequently Asked Questions
Are natural gas prices expected to rise in 2023?
Gas prices are expected to be lower this winter due to relatively full inventories, according to Fitch Ratings. Their revised price deck for 2023 is $2.80 per thousand cubic feet, which is lower than the $3.00/mcf expected in 2023 and $3.50/mcf in 2024.
What will gas cost in 2024?
Gas prices are expected to rise slightly from an average of $3.62/gal this year to an average of $3.69/gal in 2024, according to the U.S. Energy Information Administration (EIA). Meanwhile, forecasted retail prices for regular-grade gasoline in 2024 are projected to average $3.09/gal.
What is the future of natural gas?
The future of natural gas is bright, as it will continue to be a balancing fuel in power generation in the U.S., complement renewables and help push out coal, while also providing domestic use and export opportunities. Additionally, production is expected to remain steady, at around 105 Bcf/d for the foreseeable future.
What is natural gas trading at right now?
Right now, natural gas is trading at a live quote on the Henry Hub.
What is the energy market outlook for 2023?
The energy market outlook for 2023 is looking optimistic with around USD 2.8 trillion being invested in energy and 619 gigawatts of solar, wind, and storage coming online. However, global energy consumption is estimated to only grow by 1.3% and a potential recession or new COVID wave could weaken demand and hurt stock performance.