Investing.com – Natural gas prices are expected to see a major turnaround in 2025, according to analysts at BofA Securities.
Analysts note that markets are likely to see tighter supply and higher prices driven by factors such as increased demand for LNG exports and lower production growth in key basins such as Haynesville.
This is consistent with a broader structural shift towards increasing demand for natural gas in both domestic and international markets.
According to Bank of America forecasts, natural gas prices may reach a baseline of $4.00 per million British thermal units on the Nymex exchange, which represents an increase from previous expectations.
This increase in prices is due to the contraction in supply and demand balances expected in the second half of 2025.
The start-up of LNG export projects, such as Plaquemines LNG and Corpus Christi Phase 3, will add new demand, which could exceed the ability of U.S. producers to meet this demand with current supply growth levels.
These facilities alone are expected to create an additional demand of 3.5 billion cubic feet per day.
The report highlights the challenges facing production growth, particularly in the Haynesville Basin, which faces structural impediments such as a decline in the number of rigs and restricted infrastructure development.
Analysts point out that production in the basin is declining steadily, with limited ability to intensify it to meet new demand.
The consolidation among producers in Hinesville is seen as a double-edged sword: while it has improved operational efficiency, it has also strengthened production discipline, meaning producers are less likely to oversupply the market.
At the same time, demand for LNG and domestic electrification are seen as long-term drivers of natural gas consumption, making natural gas a critical component of energy transition strategies.
Bank of America analysts see global LNG arbitrage opportunities further strengthening the case for rising US natural gas prices, as international markets remain willing to pay a premium for gas compared to domestic standards.
On the other hand, oil markets face a more challenging outlook in 2025, with Bank of America anticipating an oversupply scenario that could keep oil prices low.
This dynamic is expected to amplify the attractiveness of gas-focused exploration and production companies compared to their oil-focused counterparts.
As gas valuations remain relatively undervalued compared to long-term fundamentals, Bank of America sees potential for a rerating of gas-focused stocks.
In the Canadian context, the upcoming Canadian LNG export facility operated by Shell is expected to provide a macroeconomic boost to natural gas producers in Western Canada.
Although the full ramp-up of this facility will take time, AECO's basis is expected to tighten over time, benefiting producers like Ovintiv (NYSE:), which was upgraded to 'buy' by Bank of America based on this thesis.
