The natural Gas forecast is an indication of where technical and fundamental analysts think the nat gas price may be in the future. You can use these gas forecasts to help you decide if now is the right time to buy Natural Gas futures, CFDs, options or derivatives or if you should wait until the price is lower.
Natural Gas Forecast Highlights
- Natural Gas corrected persistently during the summer
- Technical floors are slowly being established (eg $2 at HH Gas); the downtrend still weighs on the commodity
- Seasonality effects may impact gas prices into the year-end
How has Natural Gas performed recently?
Natural Gas is an abundant natural resource used to power residential, transport and commercial entities. Odorless and colourless, natural gas is mostly produced in the US and Russia (see bel0w). Henry Hub, located in Erath, Louisiana (next to Texas), is the most well-known gas distribution hub in America. As Texas is the most prolific gas producing state (almost a quarter of US’s total), Henry Hub serves as a strategic and crucial distribution hub. Given this backdrop, gas futures traded in the CME are named Henry Hub Gas contracts with the ticker ‘NG’ (overview of NG futures contracts).
In Europe, the Intercontinental Exchange or ICE also commercialised gas trading in the UK. The gas futures contracts called ‘UK NBP Natural Gas Futures’ (link to contract specifications). However, a more frequently traded gas derivative contract is the Dutch TTF Natural Gas Futures, which is also on the ICE platform (see contract specification here).
Due to the Russo-Ukraine conflict, natural gas prices had experienced extremely wild swings over the past four years, especially in Europe. From the pandemic lows in early 2020, prices surged hundreds of percent in just 24 months (see below). Sky-high energy prices naturally heaped enormous financial pain on industrials and residential users. Inflation rates skyrocketed.
But societies adjust. Switching energy supplies, building more storage capacity and exhorting household to use less gas all help to deal with the gas crisis back in 2022/23. These tactics, and slowing demand, pulled prices significantly down from the 2022 peaks. Natural gas prices are currently range trading with their historical norms. There was a 50 percent rally back in spring and early summer. But this advance, like crude prices, has regressed back to range support. Prices are finding temporary support around $2.0.
Is it a good time to buy Natural Gas?
Based on the above analysis, it is a good time to buy Natural Gas now? Here I am referring to the US Henry Hub Gas futures.
Technically, natural gas is still attempting to complete the base development that started back in early August. A little churning around $2.2 is expected for now, as prices may attempt to retest that $2 support.
Given that the pattern of lower reaction highs since late 2023 is still weighing on the commodity, the chart continues to favour a cautious approach.
Will Natural Gas get stronger as we head into 2025?
Natural Gas prices depend heavily on the age-old economic factors: supply and demand. In 2022, the world experienced a gas supply shock due to the military conflict in Eastern Europe. Remember, Russia is the world’s second largest producer of natural gas, after US (see below). As gas pipelines shut down, curtailed or put offline (see a brief account here), it created a massive gas deficit in the market which forced prices into the stratosphere.
These days, however, the market is more or less in equilibrium. Prices have stayed significantly below the 2022 peak as the market dislocations stabilised. The EU, for example, turned to the US to fill in the gas vacuum (which mostly arrives in liquefied form).
Did you know, for the first half of 2024, Russia still accounts for almost 20 percent of EU’s gas imports? Yes it is true. The economic bloc used to import vast quantities of Russian gas (Nord pipelines, for instance). Despite the Ukraine war, EU finds it incredibly hard to wean itself from Russian gas completely. Nowadays TurkStream and Ukraine Transit are used to transport natural gas from Russia (see various transport capacity here) into EU.
Therefore, given most sovereign actors are trying hard to maintain the current situation, natural gas is unlikely to suffer from an unexpected supply shock akin to the one we saw in 2022.
However, there are flash points that could disrupt prices, including an escalation in the Ukraine military conflict, larger-than-expected gas demand and geopolitical tensions elsewhere in the world. Unexpected seasonality effects like an extremely cold winter always increases gas demand.
Source: Visual Capitalist (2022)
What is the Natural Gas forecast in months?
For the rest of autumn of 2024, natural gas is, broadly speaking, expected to stabilise around current levels. However, as winter arrives the seasonality pattern kicks in.
Accord to the EIA, natural gas prices are expected to rebound from current low levels because of flat gas production and rising LNG (Liquefied Natural Gas) exports in 2025. As the extreme end of the forecast zone, prices may even rallied near the 2022 peaks (see below).
For now, I think that is far-fetched scenario. A rally from the current levels, however, is on the table given oversold nature of the decline. Prices seem to establish a short term floor at $2 and that could be used as a launchpad for a counter-trend rally.
Source: EIA (STEO, Sept 2024)
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Previously Jackson was the director of Stockcube Research as Head of Investors Intelligence. This pivotal role involved providing market timing advice and research to some of the world’s largest institutions and hedge funds.
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