Dr. Ken Rietz
There has been considerable market activity regarding natural gas, and plenty of chatter, especially about supply and price. For example, the Bloomberg Natural Gas TR (Total Return) is up more than 25% since last December. This week, we are summarizing articles discussing various aspects of the natural gas market. The following chart applies to all the articles.
Figure 1: Front-month futures for NYMEX natural gas
LinkedIn article by Ahmad Al-Sati
Ahmad Al-Sati, Gemcorp Capital Advisors
Natural gas prices have recently surged to a three-year high at Henry Hub as U.S. LNG exports grow and domestic pipeline constraints limit distribution. These sustained price increases are warning flags for a potentially prolonged period of elevated commodity costs. For the U.S., higher natural gas prices translate immediately to more expensive electricity (both residential and commercial), margin pressure, and persistent inflation. All this implies higher interest rates and greater capital needs for businesses.
Globally, countries that import natural gas (such as Europe and parts of Asia) benefited from lower prices of natural gas. As prices increase, countries that export natural gas (such as much of the Americas, the Middle East, and parts of Africa) will begin to benefit more. Variations are to be expected, but hedges on inflation and volatility become more important. Managing the change will be essential for success.
Qatar Warns the World Is Sleepwalking Into a 2030s Supply Crisis
Giacomo Prandelli, The Merchant News
Qatar’s energy minister is warning that we are facing a global natural gas crunch, despite the boom in gas liquification terminals sprouting up, mainly due to the massive increase in power needed for AI centers. Estimates for new gas supply in 2030 run around 360 billion cubic meters/year, but that might not be sufficient. But AT growth could require an estimated 3-6 billion cubic feet of gas, and Europe is going to continue to need non-Russian gas also, not to mention the growing need for gas in Asia.
The world thinks that it is oversupplied with natural gas. Not necessarily. We are on the edge of a crisis similar to 2021–2022. Two scenarios are possible. In the first scenario, there will be a structural shortage of gas due to growing AI and underinvestment, leading to a tight LNG market. The second scenario has a period of oversupply of LNG leading to a period of restriction due to Qatar’s influence over prices. In either case, the time of cheap LNG is over.
LinkedIn article by Greg Molnar
Greg Molnar, Gas Analyst, International Energy Agency
Over the past year, the EU and the U.S. saw opposite price movements. The EU saw TTF fall by roughly 35%, strong inflows of LNG (up 30% yoy), lower geopolitical risk, a mild winter, and stronger wind power generation. The U.S. saw a cold Q1 with early winter cold spells, record LNG feedgas demand, higher gas-fired power, and lower wind power output. The Henry Hub price reached $5.5/million BTU, the highest since December 2022.
The collapse in the TTF-HH spread is thus due at least in part to short-term softness in TTF and short-term tightness in HH. The author, Greg Molnar, gives his views. Short term (0 –6 months), he expects the spread to oscillate between $3–6/million BTU. Medium term (2026–2027), he expects the spread to be $2.5–5/million BTU. Long term (2028+), he expects the spread to be $2–4/million BTU. He also gives his perspective on global LNG flows and the impact on LNG producers and trader margins.
Global LNG Market Faces Looming Supply Glut After Years of Scarcity
Anna Shiryaevskaya, Ruth Liao, and Stephen Stapczynski, Bloomberg
Bloomberg has a more optimistic perspective. The article lists the following as takeaways of its content: The global market for liquefied natural gas faces a multiyear supply glut starting in 2026, potentially pushing prices to the lowest since the energy crisis triggered by Russia’s invasion of Ukraine.
The International Energy Agency expects the biggest boost in LNG production next year since 2019, with exports from the US already booming and more big projects to follow. Consumers can expect cheaper power and lower heating costs as the supply glut leads to lower prices, with gas prices in Europe and Asia potentially falling below $10 per million British thermal units by the fourth quarter of 2026.