Natural gas prices reached an 8-month high on lower output, cooler forecasts, and events in Israel. Will the Natural Gas prices go up further this winter? What is the Natural Gas price prediction for the next 5 years?
The U.S. benchmark Henry Hub natural gas spot price rose above USD 3.60 for the first time since January of this year. It can be assumed that events in Israel contributed to the price increase, since the Middle East is an important supplier of gas.
However, note that the bullish momentum started much earlier — gas prices have risen approximately 20% since the October 3 low. This confirms our assumptions published in the previous Natural Gas Forecast & Price Predictions update at the end of August: "This surge in momentum could be an early sign that natural gas may have started to form a base after a prolonged period of weakness and could be due for further gains on declining drilling activity on oversupply conditions, tighter credit conditions, and oversold technical conditions."
Perhaps the fundamental catalysts are seasonal factors and fears that weather conditions in the coming winter will be difficult. Natural gas prices continue to rise as supply to Europe is being reduced on all sides. First and foremost, starting of mid-October, strikes at Australian ports will cause a 10% reduction in global natural gas production. In addition, the main gas pipeline from Finland to Europe is shut down because of potential sabotage. Israel has also demanded that Chevron stop producing gas due to the increased risk in the area, which has resulted in a reduction in the delivery of gas to mainland Europe via Egypt.
However, Goldman Sachs sees a marginal impact from Israel's gas production disruption for now, according to its latest Natural Gas price forecast.
Natural Gas Price Forecast & Price Prediction – Summary
- Natural Gas price forecast Q4 2023: While EIA forecasts the U.S. benchmark Henry Hub natural gas spot price to trade above $3.70/MMBtu in December, in the short term there are prerequisites for the formation of a rollback, before heading to $4.00.
- Natural Gas price prediction 2024: EIA forecast the U.S. benchmark Henry Hub natural gas spot price to rich $3.55/MMBtu in 2024 , averaging $3.23/MMBtu for the year, a 24% advance from the 2023 average prices of $2.61/MMBtu.
- Natural Gas price prediction for the next 5 years and beyond: Rating agencies continue to expect price moderation due to lower economic growth, which will reduce demand in the short term while easing geopolitical pressures in the longer term will lead to further price declines.
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Natural Gas Forecast Q4 2023 - Q1 2024: Fundamental Outlook
Natural Gas Forecast Q4 2023 – Q1 2023: Can we expect further Gas price volatility and spikes this winter?
In its decision to stop importing gas from Russia, Europe has done well. After harsh price increases in 2022, energy prices have been progressively declining this year. The infrastructure needed to enable Natural Gas imports is expanding. And three months earlier than the November deadline, Europe's gas storage levels reached 90% of their capacity. However, the struggle is far from over, according to the latest Natural Gas Forecasts and price Predictions from energy agencies and analysts.
Natural Gas prices in Europe are +70% over their long-term average preceding the invasion. Europe is now subject to temporary price volatility due to its growing reliance on LNG imports. There are currently no tested new instruments for joint imports. Its gas infrastructure has been strained by the increase in pipeline gas from Norway. This year, the EU is still anticipated to have to purchase roughly 22 bcm from Russia; a sizable chunk of this purchase travels through Ukraine, a supply line that is in danger if the conflict persists. According to Bradshaw, the uncertainty is likely to last for a few more years. Additionally, it means that efforts to maintain a 40% reduction in petrol demand by 2030 must continue.
18 months ago, Europe experienced a major energy shock because of Russia's invasion of Ukraine. There were concerns that Europe's energy infrastructure would not be able to handle winter 2022–2023 because of the prospect of significantly less Russian gas, leading to the collapse of economies.
However, a mild winter and the EU's gradual implementation of a plan to cut its energy usage and purchase more from other providers allowed it to come out on the other side shocked but unharmed.
Without experiencing significant electricity shortages, Germany, Italy, and other gas-dependent countries transitioned away from Russian dependence. More positive news has emerged since that time. Energy costs have decreased consistently since 2023, and Europe's gas storage levels have reached 90% capacity, three months ahead of schedule and maybe 100% in September.
Politicians like Robert Habeck, Germany's energy minister, claim that the worst of the energy crisis is behind us. However, as the latest Natural Gas price forecast highlights, it is too early to be so sure.
Dependence on Natural Gas
Between early 2022 and early 2023, the proportion of EU piped gas imports from Russia decreased from 39% to just 17%. The EU is now far more dependent than before on LNG supplies to help it deal with this change.
During a rapid infrastructure upgrade that intends to increase Natural Gas capacity by one-third between 2021 and 2024, Natural Gas's overall share of EU gas imports increased from 19% in 2021 to about 39% in 2022. In fact, 13% of LNG imports into the EU still originate from Russia, whose exports have also dramatically increased since the invasion.
The rising Natural Gas prices make European countries more susceptible to market volatility, especially since 70% of these imports are made on short notice rather than through the long-term oil-linked contracts that are the standard in Asia.
For instance, due to worries about strikes at Australian Natural Gas plants, the benchmark gas price in Europe has been gradually increasing lately. This demonstrates that supplies are still limited and that our highly integrated global market is susceptible to several disruptions.
The European Commission has created programs like the EU Energy platform, an IT platform that makes it simpler for supply companies in member states to jointly buy the fuel, to help synchronize demand for Natural Gas. However, as this device has not yet been tested, it is unclear what volume of supplies it can move. Additionally, the sector worries that this form of government interference could backfire and harm the market's ability to function.
Persistent doubt regarding pipeline gas
In terms of pipeline gas, Norway has surpassed Russia to become Europe's top supplier, meeting 46% of the demand in the first quarter of 2023 (up from 38% a year earlier). Norway's gas infrastructure has been strained by this additional load. The tightness of the European market in May and June was again demonstrated by sluggish flows and higher Natural Gas prices brought on by maintenance work that was postponed. More blockages in the future due to prolonged maintenance work in Norway appear to be a possibility.
In the meantime, energypost.eu forecast that the EU will need to purchase around 20 bcm (billion cubic meters) from Russia in Q4 2023. That equates to about 11% of the pipeline gas that the bloc will use in 2022. A significant amount of travel through Ukraine, and this supply route is under threat because it seems doubtful that the current transit agreement between Russia and Ukraine will be extended after it expires in 2024.
According to the International Energy Agency, the EU was able to lower its gas consumption by 13% in 2022 (below the aim of 15%) because of its pivot away from Russia. War-weary EU states could not do so well on this front in the coming months.
The fact that costs have decreased as well as some governments' failure to do their duties last winter will not be helpful. Only 14 of the EU's 27 members adopted required energy-saving measures, and eastern countries like Poland, Romania, and Bulgaria made very modest reductions in usage. This might weaken demands for fellowship if there is a real gas shortage this winter in continental Europe.
The unpleasant truth is that, to prevent big increases in petrol prices, Europe will have to hope for mild weather in the northern hemisphere for at least another two or three winters.
Petrol costs in Europe are currently over 50% higher than their long-term average prior to the invasion, which is affecting both households and companies. With its energy-intensive chemical and automotive industries, Germany is the EU's economic powerhouse and needs to pay special attention to this. As energy-intensive businesses relocate, there are rising concerns that sustained high energy prices could encourage de-industrialization.
The good news is that in a few years (mid-2020s), the pressure on petrol should at least decrease. The market will rebalance when sizable additional Natural Gas supplies come online in the US and Qatar. The energy reduction plan predicts that by 2030, European gas demand will have decreased by 40%.
If the deployment of renewable energy in Europe accelerates and a new generation of nuclear power plants comes online, there is even discussion of a supply surplus by the end of the decade. This would permanently cut down on Europe's need to import petrol, but only if the bloc works well together to coordinate.
We witnessed what might be done in the months following the invasion when France sent gas to Germany to aid in reducing its reliance on Russia and subsequently when Germany provided additional power to French cities to assist with blackouts brought on by nuclear reactor maintenance.
The difficulty is using the same strategy for decarbonization. While France works to rally support for nuclear modernization both at home and throughout Europe, it is up against groups like the German-led "Friends of Renewals" coalition, which supports focusing primarily on renewable energy development. Such divisions could prove to be a significant barrier to a quicker transition away from fossil fuels in the energy sector.
Therefore, even though Europe has been able to shift away from Russian pipeline gas, unless it drastically lowers its gas demand over the next few years, it will continue to be susceptible to the volatility of the global gas markets.
Natural Gas Forecast Q4 2023-2024: Trade and Storage
Natural gas can be delivered from the gas field to the ultimate location using either an LNG ship or a pipeline.
LNG is a natural gas that has been cooled below -160°C to transform it into a liquid for easy transportation. The LNG is converted back into gas in a regasification facility once it reaches its destination, and then it is distributed via pipelines.
The ten largest natural gas producers, according to World Atlas, are the US, Russia, Iran, China, Qatar, Canada, Australia, Saudi Arabia, Saudi Arabia, Norway, and Algeria. China, Japan, South Korea, and India are the top importers.
Natural gas is employed in the creation of energy, several industrial processes, heating, and fertilizer manufacturing.
Global gas supply forecast
EIA forecasts U.S. natural gas exports will reach an annual record in 2023 and will continue to grow in 2024. U.S. net exports of natural gas in our forecast increased 20% this year compared with last year to an average of 12.8 billion cubic feet per day (Bcf/d). Increases in liquefied natural gas (LNG) exports and pipeline exports to Mexico drive the overall increase in net natural gas exports, while natural gas imports decline from 2022.
The United States exported more LNG than any other country in the first half of 2023, averaging 11.6 Bcf/d, 10% more than the average for all of 2022. After a decline in 3Q23, EIA forecasted natural gas exports to increase during 4Q23 and continue increasing into 2024, averaging 12.7 Bcf/d for the first nine months of 2024. In 4Q24, they forecast natural gas exports to approach 15.0 Bcf/d because of three new export projects that are set to begin operations and expand U.S. export capacity.
The agency forecasts U.S. natural gas pipeline exports, which go to both Canada and Mexico, to increase 9% this year (0.7 Bcf/d) from last year, averaging 9.0 Bcf/d for all of 2023. Pipeline exports to Mexico reached a new record in June and have remained high throughout the summer.
EIA forecasts natural gas pipeline exports to Mexico to continue increasing as pipeline projects in Mexico are completed and demand in Mexico’s electric power sector rises. U.S. natural gas imports in their forecast decline by 6%, or 0.5 Bcf/d, in 2023 compared with 2022. The decline is driven by warmer winter weather in the northern United States, resulting in less natural gas imported from Canada to meet space-heating demand.
On the other hand, IEA anticipated that the world's LNG supply would only rise by 4% (or more than 20 bcm) in 2023. This wouldn't be enough to make up for the anticipated decline in Russia's piping of gas to Europe.
In 2023, the world's supply of natural gas is forecasted to expand by more than half, with the United States taking over as the principal supplier of LNG, said IEA. The expansion of the Calcasieu Pass LNG terminal and the restart of Freeport LNG, which resumed full operations at the end of the first quarter of 2023, will be the main drivers of this growth.
For the second half of 2023, there is a lot of uncertainty regarding the quantity of Russian pipeline gas supply. Russian piped gas deliveries to advanced economies in Europe would decline by 45% (or over 35 bcm) in 2023 compared to 2022 if flows to the European Union remain at the levels seen in the first quarter. Reduced exports and weak domestic demand are predicted to significantly cut Russia's output by roughly 50 bcm in 2023, compounding the difficulties the Russian gas industry is already facing. This follows a 90 bcm reduction in Russian gas production in 2022.
Natural Gas inventories and demand forecast
According to the latest Short Term Energy Outlook, EIA, forecast U.S. natural gas in underground storage to total 3,854 billion cubic feet (Bcf) at the end of October—the end of summer injection season and the start of winter heating season—6% more than the five-year average (2018—2022).
The agency forecast natural gas inventories will increase by about 360 Bcf in October due to a combination of U.S. dry natural gas production growing to nearly 105 Bcf/d and overall U.S. demand for natural gas declining as seasonal temperature patterns emerge in October. Natural gas inventories began the injection season with a 19% surplus to the five-year average.
However, for 12 of the past 13 weeks, net injections into U.S. underground storage have been below the five-year average, dropping storage inventories closer to the five-year average. Their forecast shows the most U.S. natural gas inventories entering the winter heating season since 2020 and the fourth-most in the past 10 years.
Natural Gas Price Forecast - Technical Outlook
Natural gas prices have been largely stuck in its base-building phase since February this year, but are starting to see some signs of life lately, as a near-term ascending channel pattern led prices to touch a new eight-month high overnight. Thus far, prices have managed to stay above its Ichimoku Cloud zone on the daily chart after reclaiming it back in June 2023, with the cloud providing intermittent support on at least three previous occasions.
Natural Gas peaks again to a new year-to-date high near $3.6360, with the Relative Strength Index (RSI) in the daily chart reaching overbought levels. Although normally this is a signal that prices should start to ease, do not expect to see a peak yet. Several more headlines are coming in, signaling more supply crunches in the near future.
On the downside, the trend channel needs to act as support near $3.30. In case this breaks down again, Natural gas prices could sink to $.3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink below $3 towards $2.85, near the 55-day Simple Moving Average.
Natural Gas Price Predictions 2023
In its latest Natural Gas forecast, the US Energy Information Administration expects the U.S. benchmark Henry Hub natural gas spot price to increase throughout 2023 from its recent lows. The agency expects the monthly average price to reach 3.71 in December on increased demand and reduced production.
Due to expected mild winter weather from the El Niño phenomenon and continued production growth, Fitch Ratings revised downward their Henry Hub Natural Gas price prediction for 2023 to $2.80 per thousand cubic feet (mcf) and $3.25/mcf in 2024 from $3.00/mcf in 2023 and $3.50/mcf in 2024.
The agency maintains its long-term price prediction for natural gas (Henry Hub) unchanged at $2.75/mcf. Fitch concludes it is unlikely prices will improve in the near term beyond typical seasonal patterns and current strip pricing. Rated natural gas producers in the U.S. and Canada are generally protected from a short-term decline in prices through hedges and improved balance sheets. Henry Hub natural gas prices remain stubbornly low in 2023, although prices recovered from a $2.00 low reached earlier in the year. Production continues to grow, although this will likely moderate as rig count declines have started to gain traction. Fitch believes the effects on production will not be strong enough to counter the potential of warm winter weather, despite the uncertain path of winter weather and the production effects of a rig count decline.
Trading Economics’ Europe natural gas forecast saw the fuel trading at 3.42 USD/MMBtu by the end of this quarter, rising to 4.12 in 12 months, as of mid-October 2023.
In a natural gas forecast in mid-December, ANZ Research forecasted LNG spot price averaging $32/MMBtu in 2023, falling from $36.8/MMBtu in 2022. The price of super-chilled natural gas was projected to drop by 26.5% to $23.5 in 2024.
The World Bank in October 2022 forecast US natural gas prices could average $6.20/MMBtu in 2023 on weaker demand as households and industries curb consumption and switch to substitutes. It expected European gas prices to trade at $32 in 2023. As for LNG, the bank predicted it would average $17/MMBtu in 2023, falling from $18.40 in 2022.
Algorithm-based forecasting service Wallet Investor was bullish on its natural gas price forecast for 2023, noting that it was a very good long-term (one-year) investment. The service expected the natural gas price to trade at a high of $3.48/MMBtu in December 2023 and close the year at 3.20.
Natural Gas Forecast for the Next 5 Years
Will natural gas prices continue to decrease in the next 5 years?
At the beginning of 2023, Bank of America (BofA) Global Research forecast the US Henry Hub gas price to steadily decline to $4.50/MMBtu by December 2023 from $6.50 in December 2022.
The Henry Hub gas price was expected to edge down to an average of $6.5/MMBtu in 2023 from an average of $7.0/MMBtu in 2022, according to Fitch Solutions’ forecast on 8 December 2022. The US natural gas price was predicted to drop to $5.75 in 2023. It forecast the UK’s natural gas price National Balancing Point (NBP) to average $34.8/MMBtu in 2023, dropping to $39.0/MMBtu in 2022.
Multinational lender ABN-AMRO on 12 December forecast saw natural gas prices falling to $6.5/MMBtu in 2023 and dropping further to $5 in 2024, from $7.30 in 2022.
ANZ Research forecast the LNG spot price to drop to an average of $32/MMBtu in 2023 and $23.5/MMBtu in 2024, compared with an estimated $36.8/MMBtu in 2022.
The World Bank forecast US natural gas prices could average $6 in 2024. It expected European gas prices to trade at $28 in 2024, dropping from $40 in 2022. As for LNG, the bank predicted it would average $15.90 in 2024, falling from $18.40 in 2022.
In its natural gas price forecast for 2025, Wallet Investor’s system projected the fuel to rise to $8.798/MMBtu by December, climbing to $12.013 by January 2028.
Natural Gas Forecast for 2030-2050
While analysts typically did not provide a long-term outlook for natural gas prices, algorithm-based price prediction services can offer such forecasts by assessing historical data. Let’s take a look at what the future price of natural gas could be.
Fitch Rating’s long-term natural gas price forecast on 5 December expected Henry Hub to average $2.75 per 1,000 cubic feet (Mcf) and Dutch TTF to average $5.0/Mcf in 2026 and beyond, dropping from $3/MMBtu and $10/MMBtu in 2025 respectively. The firm did give any predictions for how much gas would cost in 2030.
Deloitte’s natural gas price forecast for 2030 in September saw Henry Hub trading at $5.40/Mcf, down from $8.50/Mcf in 2022. The firm’s natural gas price forecast for 2040 expected the US gas price to rise to $6.55/Mcf.
In 2041, Henry Hub was expected to trade at $6.70/MMBtu. It did not give a natural gas price forecast for 2050, but Deloitte projected Henry Hub’s prices to increase by 2% per year after 2041.
Most analysts are highly cautious about providing long-term natural gas price forecasts due to the volatility of the energy market.
When looking for future gas price predictions and attempting to assess the long-term outlook for natural gas prices, bear in mind that analysts’ forecasts can be wrong. Analysts’ projections are based on making fundamental and technical studies of the asset’s performance, but past performance never guarantees future results.
Always do your own research and remember that your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio, and how comfortable you feel about losing money. Never invest more money than you can afford to lose.
Natural Gas Historical Performance
Natural gas prices soared from the second half of 2020 to the third quarter of 2022, owing to rising post-COVID-19 demand and concerns about Russia’s supply after it invaded Ukraine in February 2022.
In the fourth quarter of 2021, uncertainties regarding Russia’s supply bolstered the price rally, according to Cedigaz. Europe’s natural gas price reached its highest price for 2021 at €187/MWh on 21 December, before retreating to €70 on the last day of 2021.
Dutch Title Transfer Facility (TTF), the European gas price benchmark futures, rose almost 268% in 2021, while JKM rose 113%. US natural gas prices increased by almost 47% in 2021.
Global natural gas prices tumbled in the second half of 2022, from the heights reached in August.
US natural gas price began 2023 at $4.38, having fallen from a 14-year high of $9.85 per metric million British thermal units (MMBtu) on 29 August.
The recent Natural Gas price action started a base building after hitting seven-month highs around $2. Following this reversal pattern, natural gas reached an 8-month high at the beginning of Q4 2023.
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