Investing.com — Natural gas prices are expected to experience a significant transformation in 2025, according to analysts at BofA Securities.
Analysts suggest markets are likely to see supply cuts and prices rise, driven by factors such as increased export demand for liquefied natural gas and reduced production growth in key basins like the Haynesville.
This is in line with a broader structural shift towards greater demand for natural gas on the domestic and international markets.
According to BofA’s projections, natural gas prices could hit an initial high of $4.00 per MMBtu on the NYMEX, marking an increase from earlier expectations.
This price increase is underpinned by the tight supply-demand balance expected in the second half of 2025.
The launch of LNG export projects, such as Plaquemines LNG and Corpus Christi Stage 3, will lead to new demand, potentially exceeding the ability of US producers to meet that demand with current levels of supply growth.
These plants alone are expected to create an incremental demand of 3.5 billion cubic feet per day.
The report highlights challenges to production growth, particularly in the Haynesville Basin, which faces structural obstacles such as a decline in the number of wells and limited infrastructure development.
Analysts note that production in the basin has been steadily declining, with limited ability to increase to meet new demand.
Consolidation among producers in Haynesville is seen as a double-edged sword: While it has improved operational efficiency, it has also strengthened production discipline, meaning producers are unlikely to oversupply the market.
Meanwhile, LNG demand and domestic electrification are seen as long-term drivers of natural gas consumption, positioning natural gas as a critical component of energy transition strategies.
BofA analysts say global LNG arbitrage opportunities further strengthen the case for higher US natural gas prices, as international markets remain willing to pay a premium for gas compared to domestic benchmarks.
On the other hand, oil markets face a more challenging outlook in 2025, with BofA predicting an oversupply scenario that could keep oil prices low.
This dynamic is expected to increase the attractiveness of gas exploration and production companies over their oil-focused counterparts.
As gas valuations remain relatively undervalued compared to long-term fundamentals, BofA sees potential for re-rating gas-focused stocks.
In the Canadian context, the upcoming Canadian LNG export facility operated by Shell is expected to provide a macroeconomic boost to Western Canadian natural gas producers.
While this drive will take time to fully lift, the AECO fundamentals are expected to tighten over time, benefiting producers like Ovintivo (NYSE 🙂 ), which BofA upgraded to “Buy” based on this thesis.
