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BMI, a Fitch Solutions company, revealed its latest Henry Hub front month natural gas price forecasts out to 2028 in a new report sent to Rigzone late last week.
According to the report, BMI now expects the commodity to average $2.8 per million British thermal units (MMBtu) in 2024, $3.6 per MMBtu in 2025, $3.8 per MMBtu across 2026 and 2027, and $4.0 per MMBtu in 2028.
The report also included a Bloomberg Consensus, which projected that the Henry Hub price will average $2.7 per MMBtu this year, $3.6 per MMBtu in 2025, $3.7 per MMBtu in 2026, and $3.8 per MMBtu across 2027 and 2028.
In a previous report sent to Rigzone back in January, BMI forecast that the Henry Hub price would average $3.4 per MMBtu in 2025, $3.6 per MMBtu in 2026, $3.8 per MMBtu across 2027 and 2028, and $4.0 per MMBtu in 2028.
A Bloomberg Consensus included in that report projected that the commodity would come in at $3.3 per MMBtu in 2024, $3.8 per MMBtu in 2025, $4.0 per MMBtu across 2026 and 2027, and $3.4 per MMBtu in 2028.
“We have cut our 2024 Henry Hub front month natural gas price forecast to $2.8 per MMBtu from our initial forecast of $3.4 per MMBtu to reflect the severe price declines recorded in Q124,” analysts at BMI noted in the company’s latest report.
“This means the 2024 average Henry Hub price will settle above current lows and only slightly above 2023 levels,” they added.
“Despite the expectation of prolonged weakness in prices over the near term, front month prices are expected to rebound over the remainder of 2024, on the back of strengthening demand driven by the power, industrial, and LNG sectors, and weaker than expected supply, which will tighten the domestic gas market,” they went on to state.
The analysts revealed in the report that they have cut their 2024 natural gas production forecast from year on year growth of 3.6 percent to 1.2 percent, “considering announcements from many U.S. natural gas producers and the broadly weakening sentiment in the domestic market”.
The BMI analysts also noted in the report that, beyond 2024, they expect natural gas prices to remain on an upward trajectory, “supported by the expanding LNG industry and strong domestic demand, particularly from the power sector”.
Intensified Volatility
In the report, the BMI analysts highlighted that, over the first quarter of this year, Henry Hub front month prices “experienced intensified volatility, with the benchmark rising to over $3.3 per MMBtu in mid-January, driven by supply disruptions and heightened demand amid a cold snap in some of the largest gas producing basins in the U.S.”.
The trend abruptly reversed once the cold snap passed and the weather forecast for the remaining winter months indicated relatively mild temperatures, the analysts stated in the report.
“This, coupled with healthy storage levels, continued growth in natural gas output, and some temporary outages of LNG production at Freeport LNG, caused Henry Hub prices to decline to the lowest levels since June 2020,” they added.
“Prices tumbled to $1.58 per MMBtu before recovering only slightly and averaged $1.75 per MMBtu in March 2024,” they continued.
USA Gas Balances Remain Oversupplied
In a gas and LNG market update sent to Rigzone on April 11, Rystad Energy Senior Analyst Masanori Odaka highlighted that prompt month Henry Hub prices “rose 1.9 percent to approximately $1.57 per MMBtu on 5 April”.
“U.S. gas balances remain oversupplied, with Lower 48 storage levels 23 percent higher than in 2023 and 38 percent higher than the five-year average as the market enters the non-peak season for gas,” Odaka added in the report.
“In the forward curve, contango continues to steepen with winter prices averaging $3.26 per MMBtu as market participants expect LNG export expansions will provide pricing upside,” Odaka continued.
The Rystad analyst noted in the report that U.S. dry gas production levels continue to remain steady “as curtailments are anticipated to continue”.
“Our latest forecast indicates summer production will average 102.5 billion cubic feet per day (Bcfpd), 1.5 Bcfpd lower than our previous estimates,” Odaka added.
To contact the author, email andreas.exarheas@rigzone.com
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