The U.S. natural gas market is poised to enter a new cycle of demand growth thanks to surging LNG exports and rising electricity demand, Morgan Stanely has predicted. Over the past few years, dozens of pundits and industry experts have predicted that the ongoing Fourth Industrial Revolution will drive unprecedented electricity demand growth in the United States and globally. Last year, the power sector consulting firm Grid Strategies published a report titled “The Era of Flat Power Demand is Over,” which pointed out that United States grid planners—utilities and regional transmission operators (RTOs)—had nearly doubled growth projections in their five-year demand forecasts. For the first time in decades, demand for electricity in the U.S. is projected to grow by as much as 15% over the next decade driven by the Artificial Intelligence (AI), clean energy manufacturing and cryptocurrencies boom.
The ongoing natural gas rally shows no signs of abating. U.S. natural gas futures jumped over 16% over the past two weeks to trade at $3.11/MMBtu in Wednesday’s trading session. U.S. gas prices have been rising on expectations of higher demand and production continues to slow down. Meanwhile, colder weather at the end of November is expected to boost heating demand. Overall, U.S. gas production is expected to decline in 2024, marking the first drop since the pandemic disrupted demand in 2020 as many producers cut back due to lower prices.
Earlier, the U.S. Energy Information Administration(EIA) predicted that U.S. natural gas prices will see a big rally in the second half of the current year thanks to production cuts. According to the EIA, Henry Hub natural gas spot price will average almost $2.90 per million British thermal units (MMBtu) in 2H24, up from $2.10/MMBtu in 1H24, good for a 38.1% increase. In its October short-term energy outlook (STEO), the EIA forecast Henry Hub spot prices would average $3.06/MMBtu in 2025. On a quarterly basis, the EIA predicted in the October STEO that Q4 2024 Henry Hub spots prices would average $2.81/MMBtu; $3.16/MMBtu in Q1 2025, dip lower in Q2 and then climb again up to $3.35/MMBtu in Q4 2025.
By Alex Kimani for Oilprice.com
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