By Patti Domm

The liquefied natural gas market is booming, so much so that some in the industry have worried about a glut. Too much supply could push down prices and profits.

But executives speaking at an energy conference in Houston dispute that view. Several said the demand picture is strong, even before accounting for a surge in data centers for artificial intelligence. Still, the process of meeting global demand could push up prices in the U.S.

Freeport LNG CEO Michael Smith said he has been hearing that a period of oversupply is coming. Such forecasts have been wrong before and are wrong now, he said.

"The market's very tight. The prices have been very good this year. Demand just continues to grow, and I believe it's going to continue to grow based on all the trend lines we see," he said.

The U.S. is the largest gas producer in the world and the largest exporter, shipping about 14 billion cubic feet a day of LNG last year. U.S. LNG exports are a $34 billion industry.

The global LNG market is expected to grow by 40% over the next four years, according to S&P Global.

"We would describe the market as moving back to balance in 2026-2027, moving from a tight market to a balanced market," said Michael Stoppard, chief strategist for global gas at S&P Global.

The market will see a burst of supply and then slow, said Stoppard, speaking on the sidelines of the CERAWeek by S&P Global conference. By 2040, the global LNG market will increase by 60%. Most of that supply will be from the U.S., followed by Qatar. New cargoes are also expected to come from Canada, Mozambique, and Argentina.

Data center demand will be global, executives said.

"You have multiple multi-trillion market cap companies that want to spend a trillion dollars over the next 10 years on adding new electricity demand, and a big portion of that has to be overseas. That capacity doesn't exist today to do it, so capital is going to figure it out," said Michael Sabel, CEO of venture LNG.

Natural gas is a choice fuel for powering data centers because of its 24/7 reliability.

"We have plans to essentially double our LNG business over the next couple of years," said Dan Ammann, president of upstream at Exxon Mobil.

Exxon Mobil's latest forecast expects oil and gas to be 54% of the global energy mix in 2050, down just slightly from 56% today, according to Ammann. That forecast includes growth in gas, a decline in coal, flat oil demand, and an increase in renewables.

Buyers are signing long-term contracts, including in Europe, said Freeport's Smith. Buyers remember when spot gas prices in Europe surged after Russia's invasion of Ukraine and are locking in pricing.

Russian gas is still a wild card for the market. Europe drastically cut pipeline imports after the 2022 invasion of Ukraine. A permanent cease-fire could see those sales restart. Russian President Vladimir Putin said Thursday he was open to a temporary truce.

Stoppard said S&P analysts don't believe a permanent cease-fire is likely.

Smith agreed. Customers remember that Russia itself has cut off supplies before. "They want energy security. America supplies that," he said.

Markets previously seen as mature, such as Japan and South Korea, are now seeing growth, Smith said.

Japan's demand for LNG last year was reportedly 66 million tons. "They are telling me because of AI, they're going to be in the mid 80s," he said.

"South Korea just announced a 3-gigawatt demand for a new air center. They need more. Europe, where 65% of our gas goes, they need more LNG. Our customers are asking for more gas," he said.

Europe will still want gas despite its plans to reduce net carbon emissions to zero by 2050, Smith said. European Union officials "told me to my face, net carbon zero doesn't mean no natural gas," he said.

A Department of Energy study, released in December, estimated that gas prices could rise 30% by 2050 if exports weren't limited and consumer electricity payments could rise by "well over $100" a year by 2050. In other words, demand from U.S. consumers would be competing in an international market.

Buyers generally pay more overseas than in the U.S. there was a "huge differential" this winter, Stoppard said. Global prices were over $10 MMBtu, while the U.S. paid $2-4.

"The price of gas in the U.S. could go up, even if the price of gas globally goes down," said Stoppard. But S&P's projections for price hikes are modest, Stoppard said, citing a report by S&P Global funded by the U.S. chamber of commerce.

"Our study showed a 15-cent increase in U.S. prices and a $2 reduction in international prices," he said.

Write to editors@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 13, 2025 14:43 ET (18:43 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.