Natural gas prices surged last week, marking one of the strongest rallies in a year. A combination of colder weather forecasts, increased liquefied natural gas (“LNG”) exports, and a surprising drawdown in U.S. gas inventories were the main drivers. As the market prepares for a tight supply-demand scenario, upstream operators like EQT Corporation EQT, EOG Resources EOG and Expand Energy EXE gear up for production growth in 2025.
The onset of winter has amplified heating needs across the United States, with forecasts predicting even colder weather ahead. This shift has pushed gas prices higher, with futures for December delivery settling at $3.13 on Friday, marking a 10.8% increase over the week after reaching their highest level in about a year. With temperature-driven demand signaling the start of the winter storage withdrawal season, stockpiles held in underground storage in the lower 48 states fell 3 billion cubic feet (Bcf) for the week ended Nov. 15, contrary to analysts’ guidance of a 5 Bcf addition.
U.S. natural gas production has seen a downward trend in 2024, falling to 100.7 billion cubic feet per day (Bcf/d) in November, from a record 105.3 Bcf/d in December 2023. This has also been pivotal in triggering the commodity’s rally. Meanwhile, LNG exports hit an 11-month high as facilities like Cameron LNG in Louisiana ramped up capacity. This dual pressure of declining domestic production and increasing export demand has tightened the market, pushing prices upward.
While 2024 production is projected to decline for the first time since 2020, the U.S. Energy Information Administration (“EIA”) anticipates a recovery in 2025. Dry gas production is expected to rise to 104.5 Bcf/d, coupled with a 14% growth in LNG export demand. This resurgence is likely to support higher average annual prices, projected to increase by over 40% from 2024 levels.
In this context, let’s discuss a few U.S. natural gas producers planning significant production increases in 2025, reversing cuts from the past year.
EQT Corporation, one of the largest U.S. gas producers, has raised its fourth-quarter 2024 production guidance to 6.03-6.58 Bcf/d, up from earlier estimates of 5.60-6.14 Bcf/d. Actual production stood at 6.32 Bcf/d in Q3. The firm anticipates a slight production increase by 2025, positioning EQT to meet export-driven demand growth.
EOG Resources expects its domestic gas output to rise from 1.745 Bcf/d in Q3 to 1.8-1.85 Bcf/d in the December quarter. This projected growth supports an 11% annual increase by 2025.
Expand Energy, formed from the Chesapeake-Southwestern merger, targets production near 7 Bcf/d in 2025, up from 6.75 Bcf/d in the third quarter of 2024. The Zacks Rank #3 (Hold) company has an additional 1.0 Bcf/d in short-cycle capacity for activation if prices justify.
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Natural gas is not only seeing heightened domestic demand but also global interest. Europe’s energy vulnerability, made worse by the Russia-Ukraine conflict and colder winters, has boosted international prices. As the United States strengthens its position as the world’s leading LNG supplier, demand for exports is expected to grow further.
Despite short-term supply constraints, the long-term outlook for natural gas remains robust. The anticipated production rebound, along with infrastructure expansions like new LNG terminals, promises to balance the market. This blend of higher demand and increasing supply sets the stage for stable growth in the natural gas markets.
In conclusion, while current price gains reflect immediate seasonal and geopolitical factors, the production recovery and expanding export markets underscore the resilience of natural gas as a key energy resource. For investors, this points to promising opportunities in the evolving energy landscape.
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