(Investing) – A cold start to winter and record liquefied natural gas (LNG) flows have helped drive a strong rally in prices since mid-October, said analysts at Morgan Stanley, seeing further upside ahead.
At 08:55 ET (13:55 GMT), natural gas prices fell 0.5% to $4.968 per million British thermal units, or MMBtu, but are up over 17% over the course of the last month and over 36% higher year-to-date.
For the last several months, analysts at the U.S. bank have been calling for Henry Hub to break above $5/mmbtu by early 2026. Prices have now rallied around 60% since mid-October, with the prompt contract climbing above $4.90 in recent days.
The Henry Hub is a crucial natural gas distribution hub located in Erath, Louisiana, that serves as the official pricing point and delivery location for natural gas futures contracts traded on the New York Mercantile Exchange.
It is widely recognized as the primary price benchmark for the North American natural gas market.
The move higher reflects better-than-feared end of season storage, record LNG flows, and a cold start to winter, with December now forecast to be the coldest in roughly a decade.
At the same time, strong supply has tempered some of the enthusiasm around next year’s set-up, leaving the forward curve heavily backwardated, a situation in which the spot or cash price of a commodity is higher than the forward price.
“While we had assumed seasonal uptick in production, the last two weeks of data has trended a bit above our forecast. That said, this has been more than offset by stronger LNG feedgas flows and colder weather revisions,” analysts at Morgan Stanley said, in a note dated Dec. 3.
“We see further upside in the quarters ahead and reiterate our $5 forecast for 2026.”
