Natural gas continues to surge; experts 'cautiously optimistic' about 2025

Natural gas prices continued to rise on Monday as strong fundamentals and tensions between Russia and Ukraine supported sentiments. 

At the time of writing, the Henry Hub natural gas price was 6% higher at $3.484 per million British thermal units (mBtu). 

“This surge comes after prices completed a 50% Fibonacci retracement near $3.12, followed by a sharp rebound,” Christopher Lewis, an analyst at Fxempire.com said in a report. 

He noted:

Forecasts for 2025

Analysts remained "cautiously optimistic" on natural gas prices for the next year, driven by a mix of global demand trends, supply constraints and weather-related uncertainties, according to Investing.com

Natural gas prices are expected to remain bullish next year, according to Investing.com. 

According to analysts at BofA Securities, Henry Hub natural gas prices are expected to average around $3.30 per mBtu for 2024.

This will be a sharp rebound from the levels seen in 2023. 

“Natural gas prices in 2024 were characterized by subdued trading, largely oscillating between $2 and $3/MMBtu, making it the weakest year since the pandemic-induced slump in 2020,” Investing.com said in the report. 

New terminals in the US

Several factors are expected to tighten the natural gas markets in 2025 and boost prices. 

A rise in liquefied natural gas (LNG) exports from the new facilities in Plaquemines and Corpus Christi Stage 3 projects in the US will increase demand from other countries. 

Increased exports from the US could strain domestic feed gas supply and lift local prices. 

“The ongoing growth in exports to Mexico via pipeline, which hit record levels in 2024, further underscores the international pull on U.S. gas,” Investing.com said. 

US weather

Forecasts indicate that the 2024-25 winter in the US could be 2 degrees Fahrenheit colder than the previous year. 

According to the Investing.com report, the potentially harsher weather during the winter season in the US could drive up demand for gas by 500 billion cubic feet. 

“There’s also the possibility that maybe this has a little bit to do with what’s going on in Ukraine,” Fxempire’s Lewis said. 

However, if warmer-than-expected temperatures prevail, demand for gas could be depressed, limiting price gains. 

Additionally, the structural shift in the US power generation mix could also support gas demand. 

“Ongoing retirements of coal-fired power plants, coupled with the rise of renewable energy, have entrenched natural gas as a critical bridge fuel,” Investing.com said. 

Russian gas flow via Ukraine stable

Russian gas exports to Europe through Ukraine remained stable on Monday despite conflict between Gazprom and Austrian-based OMV, according to a Reuters report. 

Russia halted gas flows to Austrian OMV earlier this month in a dispute over payments. However, gas flows to Europe remained steady. 

The current five-year gas transit deal between Russia and Ukraine is set to expire on December 31. Kyiv had earlier said that it would not engage in talks with Moscow about a renewal. 

Gazprom said it would send 42 million cubic metres (mcm) of gas to Europe via Ukraine on Monday, unchanged from Sunday, according to Reuters.