Natural gas inventories started the year at 385 billion cubic feet, or nearly 13% above the five-year average of 2019-23. Cold weather in the US dwindled the excess reserves, with inventories currently at 82 billion cubic feet, or about 4% above the 2019-23 average. Unsurprisingly, we saw prices fall from USD 4/mmbtu to USD 3/mmbtu in January on temporary milder temperatures, before moving up again to above USD 4/mmbtu amid a renewed cold snap.
The cold weather also led to further freeze-offs, capping production, but this now seems to be recovering. We see structural support for US natural gas prices over the coming years, driven by liquefied natural gas (LNG) and pipeline exports, and likely higher power demand in the US, requiring more natural gas to generate electricity. US LNG net-exports seem to have risen to a fresh record high of 15.5 billion cubic feet per day in recent days, and we think the trend of higher exports is likely to continue.
We continue to believe that rising natural gas exports require higher production, which will only happen if prices trade higher over the next 12 months. But at the same time, we are moving into the "shoulder season" where demand seasonally weakens. That said, recovering production from freeze-offs could keep the US natural gas market better supplied. So, we wouldn't rule out a renewed price setback in the near term. Considering the near-term downside risks to prices, we remain on the sidelines at present, preferring to wait for a price setback. Considering that market participants currently price natural gas for December 2025 at USD 5.10/mmbtu, high roll costs should also be taken into account.
US natural gas prices
US natural gas inventories
