Investing.com — Natural gas prices are expected to experience significant volatility in 2025, according to analysts at BofA Securities.
Analysts suggest markets are likely to see tighter supply and higher prices driven by factors such as increased demand for liquefied natural gas exports and slower production growth at key fields such as Haynesville.
This coincides with a broader structural shift towards higher demand for natural gas in both domestic and international markets.
According to BofA projections, natural gas prices could reach $4.00 per MMBtu on the NYMEX, marking an increase from earlier expectations.
This price increase is supported by strong demand balances expected in the second half of 2025.
The implementation of LNG export projects, such as Plaquemines LNG and Corpus Christi Stage 3, will add new demand, which may exceed the ability of US producers to meet this demand at current rates of supply growth.
These facilities alone are expected to generate an increased demand of 3.5 billion cubic feet per day.
The report highlights challenges to production growth, particularly in the Haynesville Basin, which faces structural constraints such as declining rig counts and delayed infrastructure development.
Analysts note that production at the field has been steadily declining, with limited capacity to increase to meet new demand.
Consolidation among producers in Haynesville is seen as a double-edged sword: while it improved efficiency, it also strengthened production discipline, meaning producers were less likely to overproduce the market.
Meanwhile, LNG demand and residential electrification are seen as long-term natural gas utilization mechanisms, positioning natural gas as an important part of energy transition strategies.
BofA analysts argue that global LNG arbitrage opportunities reinforce the case for higher US natural gas prices, as international markets remain willing to pay gas premiums compared to domestic rates.
On the other hand, oil markets face a more challenging outlook in 2025, when BofA predicts an oversupply scenario that could keep oil prices depressed.
This trend is expected to increase the attractiveness of gas-based exploration and production companies compared to their oil-based counterparts.
As gas valuations remain moderate relative to long-term fundamentals, BofA sees potential for rerating gas-focused stocks.
In a Canadian context, the upcoming Canadian LNG export terminal operated by Shell is expected to provide a significant economic boost to natural gas producers in Western Canada.
Although the full accumulation of this facility will take time, it is expected to strengthen AECO’s base in the long run, benefiting manufacturers such as Ovintiv (NYSE: ), which was upgraded to “Buy” by BofA in this thesis.
