(Investing) – Wall Street analysts are mixed on U.S. natural gas outlook as near-term price weakness is expected to be offset by strong long-term demand growth driven by liquefied natural gas (LNG) exports and rising power needs globally.
Natural gas prices have declined sharply in recent months, with benchmark Henry Hub prices down about 28% year-to-date, as a mild end to winter left inventories roughly 5% above the five-year average, Morgan Stanley’s report said.
Analysts expect range-bound or slightly weaker prices in the near term, as seasonal demand remains soft through spring. Despite short-term weakness, demand fundamentals are strengthening as per experts. The report highlighted LNG exports as the key growth engine, with feedgas demand already rising and expected to increase significantly.
Energy sector has been reeling from volatile prices and squeezed supply ever since Iran war broke in late February. The CPI numbers released on Friday also reflected a massive surge in energy-related prices, with that index jumping 10.9% M/M, the biggest increase since September 2005. The index for gasoline prices soared 21.2% M/M. The national average retail gasoline price has broken above $4 a gallon for the first time in over three years.
Overall U.S. gas demand is projected to reach about 140 bcf/d by 2030, up from about 113 bcf/d today, Morgan Stanley said.
Electricity generation is another key driver. Lower hydro output—due to snowpack levels about 65% below normal in the western U.S.—is expected to boost gas usage for power generation. Morgan Stanley said it expects 1 bcf/d higher summer power demand year-over-year, supported by weather normalization and rising electricity needs.
