Natural gas prices are poised for a recovery in 2025, driven by increasing export demand and the burgeoning power needs of artificial intelligence. While 2024 has seen a decline in prices due to mild winters and excess supply, experts predict a significant shift in the coming year.
This optimistic outlook stems from several key factors. First, the global demand for natural gas is expected to rise substantially as countries seek to reduce their reliance on coal and embrace cleaner energy sources. This transition is further accelerated by geopolitical events, such as the ongoing conflict in Ukraine, which has disrupted traditional energy supply chains.
Second, the rapid growth of artificial intelligence is placing unprecedented demands on the power grid. Data centers, the backbone of AI infrastructure, require massive amounts of electricity to operate continuously. This surge in power consumption is projected to fuel a corresponding increase in natural gas demand, as it remains a primary source for electricity generation.
“We’re constructive on power, and because we’re constructive on power, we think natural gas is going to perform well,” noted Francisco Blanch, head of Bank of America’s global commodities and derivatives research.
A natural gas treatment plant. (Getty Creative)
Experts predict a significant increase in power demand from data centers, ranging between 10% and 15% annually until 2030. By 2030, these energy-intensive facilities could account for up to 5% of the world’s total power consumption. This escalating demand underscores the critical role of natural gas in meeting future energy needs. “These … centers have to run 24/7,” Blanch emphasized.
Dennis Kissler, senior vice president at BOK Financial, echoed this sentiment, stating, “Natural gas will be the fuel of the future,” highlighting its importance in powering the infrastructure required for electricity generation.
This positive outlook is further reinforced by companies like GE Vernova, a leading energy equipment manufacturer. The company recently raised its projections for gas turbines, citing the increasing reliance on gas-powered electricity generation in the US and the anticipated global shift towards natural gas.
GE Vernova CEO Scott Strazik emphasizes the growing role of gas in electricity generation (Yahoo Finance)
The anticipated easing of regulations surrounding the energy sector under the new presidential administration is also expected to contribute to the industry’s growth. Specifically, the removal of restrictions on liquefied natural gas (LNG) export permits and pipeline projects is projected to boost profitability.
Furthermore, rising US LNG exports, projected to increase by 15% next year, are poised to exert significant pressure on the domestic natural gas market. This surge in exports is primarily driven by Europe’s efforts to bolster its energy security and reduce its dependence on Russian gas.
S&P Global Commodity Insights forecasts that Henry Hub prices, the benchmark for natural gas futures, will average over $4.00 per million metric British thermal units (MMBtu) in 2025, a notable increase from the sub-$3.00/MMBtu average of the preceding two years.
While some analysts anticipate potential delays in LNG projects and the full impact of policy changes, the overall consensus points towards a significant price recovery for natural gas in 2025. The convergence of factors such as increased exports, surging power demand from AI, and a favorable regulatory environment positions natural gas for a robust rebound.
